The Nikkei average sank 6.4 per cent today, hitting a nearly two-week closing low, as exporters such as Honda Motor Co tumbled on the yen's strength against the dollar as fears deepened about the global economy in the wake of dismal data worldwide.
Mitsubishi Corp and other trading houses took a beating after oil prices slid to a 3-½ year low under $48 amid the grim global economic outlook and after producer group OPEC decided to leave output unchanged.
Reflecting the gloom at home, data showed confidence among Japanese manufacturers fell at its sharpest pace on record in November.
"Investors knew the economy was bad, but a series of economic indicators showed it had deteriorated far more than expected. That is responsible for most of the fall in Japanese stocks today," said Soichiro Monji, a chief strategist at Daiwa SB Investments.
"It's become clear that it's not just the United States but everyone."
Economic data showed factories were slashing output in the United States, Europe and China last month as demand dropped, while US Federal Reserve Chairman Ben Bernanke cautioned that the economy would probably remain weak for a while.
In Japan, the central bank said today it would accept a wider range of corporate debt as eligible collateral to ease Japanese companies' quickly shrinking access to funding as the end of the year approaches.
The benchmark Nikkei shed 533.53 points to 7,863.69, its lowest close since November 20th.
The fall came after the benchmark booked a 7.6 per cent gain last week for its best weekly performance in a month, and ended November as its best month since May. The broader Topix declined 4.9 per cent to 787.12.
Analysts said the market's losses accelerated on growing concerns about the fate of US automakers.
US carmakers led by General Motors yesterday rushed to finish restructuring plans demanded by Congress before lawmakers reopen the debate this week on the $25 billion in emergency funding the industry says it needs to survive.