Japan's Nikkei share average dived to a one-year low on Monday morning following a big sell-off in Wall Street on Friday after oil prices tumbled and fears grew about economic trouble in China, sending all sectors into the red.
The Nikkei fell 1.4 per cent to 16,903.28 in mid-morning trade after tumbling to as low as 16,665.05 earlier, the lowest level since January 16, 2015.
Wall Street stumbled with the S&P 500 sinking to its lowest since October 2014 as oil prices sank below $30 per barrel and fears grew about economic trouble in China. A batch of disappointing US data, including a fall in retail sales, added to worries about the global economy.
Although sentiment remains sour, traders say some investors are scooping up battered stocks after the dollar recovered above the 117.00 yen line in Asian trade after dropping to 116.56 yen , from 117.10 late in New York. The pair last stood at 117.31.
"Most investors must have freaked out after seeing a sharp fall in the market. But some of them seem to be buying on the dips when the Nikkei traded below 16,700 points," said Takatoshi Itoshima, chief portfolio manager at Commons Asset Management.
"The performances in the Japanese market will likely depend on the forex moves for the time being. As long as the dollar does not drop against the yen sharply, the Nikkei may be supported."
In mid-morning trade, Toyota Motor Corp shed 0.8 per cent, Honda Motor Co dropped 2.4 per cent and Panasonic Corp shed 2.0 per cent.
All of the Topix's 33 subsectors were in negative territory. Oil shares were lower, with Inpex Corp falling 1.6 per cent and Japan Petroleum Exploration dropping 2.3 per cent.
Financial stocks were lower as well, with Mitsubishi UFJ Financial Group dropping 1.2 per cent and Mizuho Financial Group falling 2.8 per cent.
"There probably won't be a catalyst from the Japanese market to counter external worries like oil price falls and the U.S. market's slide, so we may expect more volatility for today and tomorrow," said Hikaru Sato, a senior technical analyst at Daiwa Securities, adding that investors will likely stay risk averse as U.S. markets are closed later in the day for a holiday.
The broader Topix dropped 1.3 per cent to 1,385.22 and the JPX-Nikkei Index 400 declined 1.2 per cent to 12,475.19.