Tokyo shares closed down 1.86 percent on Monday, hit by a surging yen and losses on overseas bourses amid fresh concerns over Spain's debt crisis and the fate of the eurozone.
The Nikkei 225 index at the Tokyo Stock Exchange dropped 161.55 points to 8,508.32, while the broader Topix index of all first-section issues fell 1.80 percent, or 13.20 points, to 720.62.
Tokyo shares were dragged down by a weak euro against the yen and amid losses in Asian bourses, tracking weakness in the US and Europe last Friday, brokers said.
"There are so many negative catalysts including Europe's debt problems, a slowdown in emerging economies and the yen's gains, and this is a tough situation for riskier-assets markets like stocks," Toyota Asset Management chief strategist Masaru Hamasaki told Dow Jones Newswires.
Monex Inc. chief strategist Takashi Hiroki said: "Investors are taking a cautious stance amid increasing risks such as sluggish global growth and a strong yen."
Japanese companies may lower their guidance for the current business year to March 2013 as they release their quarterly earnings results, he said.
US and European markets fell Friday amid concerns that Spain's government could require financial help from its eurozone neighbours.
The worries sent Spanish borrowing costs to a euro-era record level, with the currency falling to multi-year lows against the dollar and yen on Monday.
Spain warned Friday its recession would drag on through 2013 and one of its indebted regions, Valencia, reached out for emergency aid from the already cash-strapped central government.
On currency markets, the euro fell to nearly 12-year lows against the yen and two-year lows against the dollar.
The European common currency bought $1.2102 and 94.48 yen in Tokyo trade, down from $1.2152 and 95.38 yen in New York late Friday.
The dollar fetched 78.06 from 78.48 in US trade.
In Tokyo exporters were down with Nikon falling 2.81 percent to 2,210 yen.
Nippon Steel was down 1.94 percent to 151 yen and JFE Holdings tumbled 3.11 percent to 1,025 yen following a weekend report that both steelmakers likely suffered steep profit drops in the April-June quarter.
All Nippon Airways fell 2.16 percent to 181 yen, below the 184 yen it priced its huge new share offering in a move aimed at raising more than $2 billion.