The benchmark Nikkei stock index tumbled to its lowest close since December on Wednesday after shedding 369 points amid renewed turmoil in global credit markets.
The 225-issue Nikkei stock average plunged 369.00 points, or 2.19 percent, to end at 16,475.61, its lowest since Dec. 8, when it closed at 16,417.82.
The Topix index of all first section issues on the Tokyo Stock Exchange lost 43.31 points, or 2.64 percent, to close at 1,594.15, its lowest since 1,580.10 on Nov. 29.
Financial issues were pounded by fresh concerns about the possibility of a global credit crunch following an assessment Tuesday by Swiss-based UBS that the turmoil will hit earnings at its investment bank.
Reports Wednesday afternoon that an Australian hedge fund suffered heavy losses linked to investments in the U.S. subprime mortgage market also hurt investor sentiment, brokers said.
The equity markets appeared to have settled down after the European, U.S., Japanese and other central banks injected massive amounts of funds into money markets to ensure global liquidity last week. But Katsuhiko Kodama, senior strategist at Toyo Securities Co., said market participants have realized that they "haven't seen everything that might emerge from the crisis yet."
On the same day, the Bank of Japan drained ¥2 trillion from the financial system, removing funds for a second day as interest rates stayed below its target.