The Nikkei average dropped 1.8 percent on Monday, as fears of slowing global growth and the spreading impact of Europe's credit woes encouraged investors to pull funds out of risk assets. Japanese shares slumped along with equity markets across Asia, as well as crude and base metals prices and US stock futures, suggesting the rout has room to continue. Shares of Sony Corp fell to their lowest intraday level in nearly a quarter century.
Bank shares slipped after weekend news that Greece will miss a deficit target set just months ago in a massive bailout package. Government draft budget figures released on Sunday showed that drastic steps taken to avert bankruptcy may not be enough. The Bank of Japan's tankan survey released before the market open showed business sentiment turned positive in the third quarter as companies restored supply chains hit by the March earthquake, even as a strong yen and the eurozone debt crisis clouded the outlook.
The Nikkei ended down 1.8 percent at 8,545.48, after falling as far as 8,455.67. The benchmark gained 1.6 percent last week but lost 2.8 percent for the month and 11.4 percent for the quarter, turning in its worst quarterly performance since June 2010. But it remained above its two-and-a-half-year closing low of 8,374.13, set on September 26.
The broader Topix index declined 1.9 percent on Monday to 747.11. Sony shed 4.5 percent to 1,439 yen, after earlier falling to 1,413, its lowest since June 1987, as foreign investors sold the stock.
Mitsubishi UFJ Financial Group fell 2.8 percent to 344 yen and Sumitomo Mitsui Financial Group slipped 2.7 percent to 2,146 yen. Major Japanese producers of electric cables and wires extended their slide into Monday, led by Sumitomo Electric, which was down 11.8 percent at 809 yen in heavy trading, after Furukawa Electric agreed on Friday to a $200 million fine to settle investigations into price-fixing in the United States.
Shares of Mitsui OSK Lines were down 7 percent at 279, after slumping to their lowest since March 2003 when the shipping company slashed its first-half earnings outlook to a net loss of 17 billion yen ($221 million) from a profit of 1 billion yen. Rival Kawasaki Kisen fell 4.9 percent and Nippon Yusen dropped 4.3 percent.
Softbank Corp rose 3.3 percent to 2,368 yen and was the heaviest-traded issue by turnover, after Jack Ma, CEO of China's e-commerce leader Alibaba, said he was keen on buying Yahoo Inc. Softbank owns about 30 percent of Alibaba Group, and holds 42 percent in Yahoo Japan, which is owned 35 percent by Yahoo. Promise Co rose by its daily limit for a second session in a row, climbing 100 yen to 759 yen, after the consumer lender said on Friday that SMFG would launch a tender offer to buy the outstanding shares of Promise it does not already own for 780 yen each.