Japan's benchmark Nikkei 225 stock index fell nearly 4 per cent on Monday amid concerns about possible slowdowns in the US and Japanese economies.
The Nikkei 225 index lost 541.25 points, or 3.97 percent, to close at 13,087.91 points on the Tokyo Stock Exchange. On Friday, the index gained 4.1 per cent.
Investors have been jittery for weeks about the possibility of a U.S. recession, which would likely weaken demand for Japanese exports.
A hefty cut in U.S. interest rates by the Federal Reserve last Tuesday lifted Japanese stocks in the latter half of last week, but a drop on Wall Street Friday hit the Tokyo market with new anxiety. The Dow Jones industrials fell 1.38 percent, while the technology-heavy Nasdaq composite index sank 1.47 percent. Japan, the world's second largest economy, has either already entered a recession or will do so in the January-March period, said one economist.
Five of the 11 components of Japan's business condition diffusion index have already hit their highs and begun deteriorating, said Tetsufumi Yamakawa, chief economist at Goldman Sachs Japan, in a report released Friday.
Deterioration in six of the 11 components indicates a recession. "A recession, which was nothing more than a risk scenario six months ago, is now turning into our main scenario," amid an export slowdown and stagnant consumption, he said.
Nippon Steel fell 7.7 percent Monday on poor October-December earnings.
Toyota Motor fell 4.1 percent as traders sold exporters on a weaker dollar. A stronger yen pushes down the earnings of Japanese exporters and makes exported goods less competitive overseas. Traders were cautious ahead of a slew of corporate quarterly earnings due this week.
The broader Topix index, which includes all shares on the Tokyo exchange's first section, fell 51.74 points, or 3.85 percent, to 1,293.03 points. The Topix surged 4.7 percent to 1,344.77 on Friday. In currencies, the dollar fell to 106.24 yen, from 107.00 yen late Friday in New York. The euro was nearly unchanged at $1.4672, from $1.4673.