TOKYO: Tokyo's benchmark Nikkei index closed down more than five per cent on Tuesday (Dec 25) amid rising doubts about the US economy and fears sparked by a US government funding crisis.
The Nikkei 225 index lost 5.01 per cent or 1,010.45 to 19,155.74, the worst finish since April 2017, while the broader Topix index plunged 4.88 per cent or 72.64 points at 1,415.55.
Analysts had warned that the Japanese market would be volatile after steep falls on Wall Street on Monday, and with a higher yen against the dollar weighing on sentiment.
But Makoto Sengoku, market analyst at Tokai Tokyo Research Institute, admitted surprise at the scale of the rout.
"I didn't expect the market would tumble this much," he told AFP before the close.
"There are no signs of selling running its course or big buyers emerging."
The dollar fetched 110.01 yen in Tokyo afternoon trade, down from 110.43 yen in New York on Monday and 111.38 yen in Asian trade on Friday.
The Tokyo market was closed for a national holiday on Monday when US shares fell sharply with investors unnerved by reports that US President Donald Trump had asked about the possibility of firing Federal Reserve Chairman Jerome Powell.
The dive also came after Treasury Secretary Steven Mnuchin's efforts to reassure investors fell flat.
Mnuchin was widely panned by market watchers over a phone call with the six biggest US banks, reporting on Twitter that the six CEOs have "ample liquidity" available.
The move "prompted worries in the market," Toshiyuki Kanayama, senior market analyst at Monex, said in a note.
Automakers were among losers in Tokyo, with Toyota dropping 5.25 per cent to 6,079 yen, Honda down 5.66 per cent at 2,756 yen and Nissan off 5.07 per cent at 838.1 yen at the break.
Sony was down 5.55 per cent at 5,000 yen and Panasonic was down 5.56 per cent at 920 yen.