Japan's Topix share index fell to its lowest level in more than three years on Wednesday as investors worried about the global economic impact of the fast spreading coronavirus. The broader Topix shed 1.5% to 1,385.12 points, its lowest close since November 2018, reversing course after rising as much as 1.1% in the morning.
The index slid 20.7% from its recent high of 1,747.20, marked in December, putting it in bear market territory.
The benchmark Nikkei average lost 2.3% to 19,416.06, a near 15-month low, after brief gains in the morning.
The Nikkei's volatility index, a measure of investors' volatility expectations based on option pricing, remained elevated at 47.09, not far from a 4-year peak of 48.89 brushed on Monday.
The Nikkei also broke below the estimated average cost of the Bank of Japan's stock purchases around 19,500, raising concerns about the central bank's credibility and the sustainability of its hyper-easy monetary policy.
Shares of the BOJ, which are majority-owned by the government but are listed in the Tokyo Exchange, tumbled 3.5% to a lifetime low on Wednesday.
US President Donald Trump said on Tuesday he would take major steps to ease economic strains caused by the spread of the flu-like virus. Headlines focused on discussions of payroll tax cuts, which helped lift market sentiment.
However, the lack of major announcements since then has left some investors unimpressed.
All but five of the 33 sector sub-indexes on the Tokyo Stock Exchange traded lower, services, real estate
and pharmaceutical being the worst three performing sectors.
In the United States, the Centers for Disease Control and Prevention reported on Tuesday 696 cases of coronavirus, an increase of 224 from its previous count, and said the number of deaths had risen by six to 25.
"We expect financial markets to remain very sensitive to incoming coronavirus-related headlines from the US and Europe over coming days," said Takashi Maruyama, head of equities at Fidelity International (FIL) Japan.
"Once bond markets stabilise, that should help to gradually steady stock markets too."
As US Treasury yields rose from all-time lows overnight, rate-sensitive financial names in Tokyo outperformed.
Mitsubishi UFJ Financial Group Inc and Mizuho Financial Group Inc gained 0.7% and 1.0%, respectively, while Dai-ichi Life Holdings Inc and T&D Holdings added 0.5% and 0.8%, in that order.
Elsewhere, amusement park operators Oriental Land Co Ltd and Sanrio Co Ltd lost 4.3% and 2.4%, respectively, as both companies decided to extend their park closures amid worries about the coronavirus.
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