Japan’s Nikkei share average fell more than 2 per cent to its lowest level since October 2014 on Wednesday as worries about the health of global banks persisted.
The Nikkei stumbled 2.6 per cent to 15,674.33 by mid-morning trade after opening slightly higher.
It had dropped to as low as 15,626.04 earlier, a level not seen since October 30, 2014.
Global equity markets have been hit hard this week by growing signs of stress in the European banking sector, which is spilling over into other regions where lenders’ profits are also under pressure.
Mitsubishi UFJ Financial Group dropped 2.5 per cent, Sumitomo Mitsui Financial Group shed 1.2 per cent and Mizuho Financial Group fell 1.4 per cent.
Japanese stocks have taken a considerable hit since the Bank of Japan’s announcement to introduce a negative interest rate policy late last month, while the yen is seeing sharp strength as investors dump riskier assets and look for safe havens amid the market turmoil.
“The BOJ has pulled a trigger of competitive monetary easing in the global market,’’ said Norihiro Fujito, senior investment strategist at Mitsubishi UFJ Morgan Stanley Securities.
“The problems led to weakening fundamentals in the Japanese market. It shows that the Abenomics rally has come to an end. It also shows that at least stocks and the yen do not get support from the BOJ alone.”
As of Tuesday’s close, a total of 53 per cent of the names on the Tokyo Stock Exchange’s first section were trading below their book value, compared to 44 per cent at end-December, according to Daiwa Securities.
Weakening oil prices added to investors’ concerns, with Inpex Corp falling 1.8 per cent and Japan Petroleum Exploration Co declining 3.6 per cent.
Oil prices slid for a fourth straight session after weak demand forecasts from the US government and the western world's energy watchdog, while weak equities also pressured prices.
Meanwhile, investors are focused on US Federal Reserve Chair Janet Yellen’s congressional testimony later in the day for any clues on the Fed’s policy outlook.
The dollar traded at 114.96 yen after sinking to a 15-month low of 114.205 overnight.
Bucking the weakness, Fanuc Corp rose 2.2 per cent after announcing a share buyback plan.
Sumco Corp jumped 7.8 per cent after the silicon wafer maker reported stronger-than-expected earnings for the year ended December.
The broader Topix dropped 2.2 per cent to 1,275.24 and the JPX-Nikkei Index 400 shed 2.3 per cent to 11,500.61.
All of the Topix's 33 subsectors were in negative territory.