Japanese stocks declined Thursday, dragged down by real estate and banks as some investors began to factor higher Japanese interest rates into their outlooks.

The Nikkei 225 index fell 222.83 points, or 1.37 percent, to 16,096.21 points on the Tokyo Stock Exchange Thursday afternoon. The index rose 80.68 points, or 0.50 percent, Wednesday.

Stocks opened higher as traders bought exporter issues on a recovery in the dollar, which was trading at 117.67 yen on the Tokyo foreign exchange market at 5 p.m. Thursday, up 0.38 yen from late Wednesday in New York.

But the market later slid on declines in real estate issues such as Sumitomo Realty and Development Co. that are deemed particularly sensitive to higher interest rates. Sumitomo Realty lost 6.62 percent to 2,820 yen ($23.90).

Sony Corp. sank 1.83 percent to 5,370 yen ($45.51), extending losses after it said Wednesday that has delayed the release of the PlayStation 3 game console until November.

"There aren't any core buyers now," said Satoru Sakumoto, deputy general manager in charge of financial institutions sales at Mizuho Securities Co.

Last week, the Bank of Japan abandoned the super-easy monetary policy it kept for five years, saying it will gradually raise interest rates _ although not for some time _ and reduce the excess cash in the banking system.

Bank of Japan Gov. Toshihiko Fukui reiterated Thursday that it was too early to discuss raising interest rates in comments to a parliamentary financial affairs committee.

The broader Topix index, which includes all shares on the exchange's first section, fell 21.72 points, 1.30 percent, to 1,654.06 points. The Topix rose 0.99 point, or 0.06 percent, Wednesday.

First-section volume rose to 1.772 billion shares, from Wednesday's 1.595 billion shares. Decliners beat advancers 1,326 to 286, while 81 issues were unchanged.

In other currency trading, the euro fell to $1.2064 from 1.2074 late Wednesday.

The yield on the 10-year Japanese government bond rose to 1.7250 percent from Wednesday's finish at 1.7200 percent. Its price fell 0.04 point to 98.93.