The Nikkei average hit a 15-month closing low below 16,000 on Wednesday, hit by a dismal market outlook and worries about the global economy.
The Nikkei ended down 372.05 points, or 2.31 percent, at 15,713.39, its lowest finish since Oct. 30, 2014. On Tuesday, it plummeted 918.86 points, the steepest point loss since May 23, 2013.
The Topix fell 39.37 points, or 3.02 percent, to close at 1,264.96, after falling 76.08 points the previous day.
The market opened slightly higher on the back of buybacks after the previous day’s plunge. But after buying ran its course, the Nikkei fell into minus territory and accelerated its downswing due to selling from risk-averse investors following overseas stock falls and tumbling crude oil prices, brokers said.
In particular, risk aversion intensified after key crude oil futures fell for the fourth straight session in New York on Tuesday, the brokers said.
Selling of major export-oriented automakers and technology firms were also spurred after the dollar fell below ¥114.50, they also said.
The Nikkei average extended its losses to over 600 points temporarily in the afternoon, dragged down by index futures-led selling amid heightened concerns over possible further stock falls, according to the brokers.
The market remained overshadowed by tumbles in the financial sector, such as banks, that reflected concerns about their earnings.
The Bank of Japan’s negative interest rate policy would “work unfavorably for banks’ earnings in the short term,” Kenichi Hirano, market analyst at K Asset Co. said.
“But the effect of the policy needs to be carefully watched in the long run,” he said. “Banks are oversold at present.”
Hirano also said, “Wednesday’s plunge was due to selling related to Friday’s special quotation fixing” to settle February index options contracts.
Investors are eager to hear what U.S. Federal Reserve Chair Janet Yellen will have to say at congressional testimony for two days from Wednesday.
It would be good news to stock markets if Yellen hints that the Fed may skip an expected interest rate hike in March, brokers said.
Falling issues outnumbered rising ones 1,780 to 131 in the TSE’s first section, while 26 issues were unchanged.
Volume increased to 3,849 million shares from Tuesday’s 3,173 million shares.
All 33 sector subindexes on the first section closed lower.
Telecommunications carriers Nippon Telegraph and Telephone, NTT Docomo and Softbank Group came under profit-taking, brokers said.
Banking groups Mitsubishi UFJ, Sumitomo Mitsui and Mizuho fell sharply, along with brokerage firms Nomura and Daiwa, as well as insurer Tokio Marine Holdings.
On the other hand, engineering firm MODEC rocketed 11.77 percent, the day after the company announced better-than-expected consolidate earnings forecasts for the year to December, brokers said.
Other winners included Internet portal Yahoo Japan, textile manufacturer Toray Industries and air conditioner maker Daikin Industries.
In index futures trading on the Osaka Exchange, the March contract on the Nikkei average dived 390 points to end at 15,670.