By Brad Frischkorn TOKYO--Tokyo stocks fell sharply Monday in their worst showing since mid-August, as the dollar was pummeled on jitters over the tense U.S. government standoff for raising the U.S. debt ceiling, triggering across-the-board selling, beginning with exporters. The fall came at a particularly bad time, as the anxiously awaited tankan business sentiment survey results, along with government plans for taxes and the fiscal budget are slated to be announced Tuesday. The Nikkei Stock Average slid 304.27 points, or 2.1% at 14,455.80 following Friday's 0.3% drop. It was the sharpest percentage fall for the benchmark since Aug. 20. The poor finish took some of the luster off an otherwise robust September. For the month, the index still added 8.0%, however--its best month since April and the second-best month of the year. The Nikkei is now up 39% year-to-date. The Topix index of all Tokyo Stock Exchange First Section issues also lost 23.42 points, or 1.9%, to 1,194.10, with 32 of 33 subindexes ending in negative territory. The specter of a U.S. government shutdown has rattled markets before. Precisely those memories were at work Monday, said traders, exacerbating routine weaker-dollar fears, recalling that similar political infighting in 2011 resulted in the loss of the U.S.' triple-A credit rating. It was also the primary driver of Wall Street's last full-blown correction. "Things are far from the 'panic stage,' but they don't have to be for investors to be spooked by the apparent intractability of the U.S. political deadlock," said Tachibana Securities market analyst Kenichi Hirano. "With U.S. and Japanese equities looking overbought, Japan shares are susceptible to both investor aversion to stocks and dollar weakness." "The fallout was reflexive," said SMBC Nikko Securities general manager of equities Hiroichi Nishi. "Few seriously expect something as serious as a U.S. debt default, but there is a track record of very nasty reactions to similar situations in the not-too-distant past." The dollar fell sharply from its Friday levels, and was seen changing hands at Y97.83 as of the close of TSE trading at 0600 GMT. Sept. 30 is the final day for most firms to calculate fiscal half-year profits as well as to figure currency repatriation levels, which are critical for exporters. Trading volume was merely moderate, however, considering the dollar's plunge, totaling just over 2.7 billion shares worth only Y1.9 trillion. Traders attributed the apathy to apprehension over Tuesday's tankan release, as well as Prime Minister Shinzo Abe's fiscal reform plans, which may include corporate tax cuts in addition to a hike in the consumption tax, among other things. Chinese markets also go on holiday Oct. 1-7. Among heavily indexed shares, Fast Retailing lost 2.4% at Y36,850, while SoftBank slipped 1.5% at Y6,790. Exporters that weighed on the index included Kyocera, which dropped 2.8% at Y5,210 and Honda Motor, which shed 2.7% at Y3,735. Mizuho Financial Group led financials down, surrendering 4.1% to Y213 after the Financial Services Agency on Friday issued a business improvement order to Mizuho Bank, contending it knowingly continued doing business with organized crime groups for more than two years, providing about 230 loans through Orient Corp. and other consumer credit firms. Orient lost 4.6% to Y270. Brokerages were also prominent selling targets; Nomura Holdings fell 3.3% to Y765. On the other hand, Toshiba well outperformed the broader indexes until late in the session, ultimately falling 1.1% to Y440 following a Nikkei report that it will consolidate its three TV plants, shed over 2,000 overseas employees, and cut Y20 billion from its fixed costs over a two-year period, halting TV sales in a dozen unprofitable overseas markets. December Nikkei 225 futures closed down 250 points, or 1.7%, at 14,490.

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