Tokyo stocks closed lower Monday, with the benchmark Nikkei stock index dropping 0.39 percent, as political turmoil in the eurozone and the potential to compound the region\'s financial woes contributed to a circumspect market mood. Traders here said that investors once again become nervous over a potentially volatile political situation in Greece as Prime Minister George Papandreou agreed to step down to allow for emergency funding and held talks with Antonis Samaras, leader of the main opposition party, with the pair agreeing to form a coalition government. Analysts said the move was met with mixed reactions here in Tokyo as on the one hand securing extra funding will help Athens stave off an impending debt default, but on the other hand they pointed out that an unstable government -- with Papandreou relinquishing leadership -- at a time of financial turmoil may not be in Greece\'s best interests. \"Greece was able to avoid a potentially worst case scenario with the formation of a coalition government, but investors can\'t relax because of what is happening in Italy,\" said Takashi Ushio, head of the investment strategy division at Marusan Securities Co. Ushio was referring to Italian Prime Minister Silvio Berlusconi facing a possible no-confidence vote which he could well lose as a number of key party members have said they will vote against their leader or not vote at all on imminent budgetary matters in the lower house of Parliament. Analysts here said that if Berlusconi were to be ousted, Italian politics could also be thrown into disarray as there is no clear-cut leader to step into Berlusconi\'s shoes. \"Opposition is mounting in Italy against Prime Minister Berlusconi, which is feeding concern that the nation can\'t make much progress on rebuilding its finances,\" remarked said Soichiro Monji, chief strategist at Daiwa SB Investments Ltd. \"News out of Italy and Europe\'s situation are weighing on stocks as well as bad earnings,\" he said. The 225-issue Nikkei Stock Average dropped 34.31 points from Friday to close at 8,767.09, with shares in Olympus and Canon trading notably lower. The broader Topix index of all First Section issues on the Tokyo Stock Exchange, meanwhile, lost 1.57 points, or 0.21 percent, to finish the day at 750.45. While games console and software maker Nintendo climbed 2.3 percent to 12,120 yen, on news the firm may be listed on a new trading bourse here comprised of a merger between the Tokyo Stock Exchange and the Osaka Securities Exchange, pegged for the latter half of 2012, other export and high-tech issues came under pressure on the first trading day of the week. Canon retreated 2 percent to 3,415 yen and Olympus Corp plunged 7.5 percent to 1,034 yen, hurt by a downgrade from Barclays Capital as the firm scrambles to regroup following a money scandal involving past acquisitions and payments made to advisers. Nissan Motor Co. also closed in negative territory, skidding down 1.6 percent to 723 yen, while Furukawa Electric plummeted 12 percent to 192 yen, following the firm slashing it\'s full-year profit forecast to a 64 million U.S. dollar loss due to a strong yen and supply chain disruptions caused by floods in Thailand. Asahi glass dropped 6.2 percent to 622 yen on a downwardly revised profit projection, also due to the Thai floods and Takeda Pharmaceutical Co. declined 2.3 percent to 3,425 yen, following disappointing operating profits in the second-quarter and a far- worse-than-expected full-year outlook that came in 30 percent lower than the firm\'s previous projection. Trading volume on Monday dropped to 1.45 billion shares on the Tokyo Exchange\'s First Section, down from Friday\'s volume of 1.67 billion shares, with advancing issues just edging declining ones by 751 to 747.