Tokyo share prices fell more than 2 per cent to hit their lowest in more than eight months on today as financial shares dropped on rekindled worries about a credit squeeze and exporters were hit by concern about a slowdown in the US economy.
Matsushita Electric Industrial tumbled 5 per cent to 2,015 yen after Nokia said it would recall 46 million batteries made by Matsushita that are used in its mobile phones.
A lower profit forecast by US retail giant Wal-Mart Stores Inc. sparked worries about a slowdown in US consumption, which accounts for 70 per cent of the gross domestic product, said Norihiro Fujito, general manager of the investment research and information division at Mitsubishi UFJ Securities.
"On top of the ongoing turmoil at financial institutions hit by the US subprime problems, we have now started to see the impact on the US economy as well as corporate earnings," he said. "It's natural that Toyota is sold and so are Japanese digital home electronics makers as they are the ones which supply goods to Wal-Mart."
The benchmark Nikkei average declined 2.19 per cent or 369.00 points to 16,475.61, the lowest close since December 8th, 2006. The broader TOPIX lost 2.64 per cent to 1,594.15, the lowest finish since November 29th, 2006.
Koichi Takatsuka, a senior fund manager at United Investments, said his main concern is the US housing market.
"Unwinding of highly leveraged funds can be salvaged by fund injections by central banks. But as for US housing prices, you don't know how much they will fall," said Takatsuka.