Investor confidence has plunged to the lowest level in decades amid concerns over bleak economic prospects.

With the downtrend in share prices continuing unabated, the Tokyo Stock Exchange's key market gauges hit post-bubble lows Tuesday.

The 225-issue Nikkei average ended at 9,475.6, a level unseen since Dec. 15, 1983. The Topix index of all shares listed on the first section ended at 926.27, its lowest since Feb. 13, 1985.

Market players now appear resigned to further volatility. Indeed, fears are widespread that the Tokyo market is passing through a crucial phase this week. Attention is focusing on banks' disposal of bad loans.

With the industrial web of cross-shareholdings unraveling, further selloffs appear inevitable in the near term.

Worries also remain over corporate earnings prospects.

The apparent delay in the disposal of nonperforming loans has prompted foreign investors to unwind their Japanese portfolios, with banking issues coming under severe selling pressure.

Investors have taken little comfort from Daiei Inc.'s debt-for-equity swap scheme and proposed mergers of ailing construction companies.

The plunge in the public approval ratings for Prime Minister Junichiro Koizumi's Cabinet after the dismissal of Foreign Minister Makiko Tanaka could intensify factional rivalries within the Liberal Democratic Party and force a delay in structural reforms.

Given all these factors, Tokyo stocks appear likely to wind up February with heavier-than-expected losses.

Although both micro- and macroeconomic fundamentals now look much healthier than right after the terrorist attacks in the U.S., investors remain unconvinced. Government figures showing the first month-on-month rise in industrial production in December have gone largely unheeded.

An isolated bright spot is optimism about U.S. economic pickup that could bode well for company profits in Japan, too.

On the over-the-counter market, high-priced activity is continuing, raising expectations that the market's key gauge will soon recoup more than it lost since shortly after the Sept. 11 terrorist attacks.

Still, investors are turning increasingly selective and opting largely for information technology issues.