Ratings company Fitch on Friday slashed Greece's rating by three notches to B+, citing its growing problems in getting its public finances in order.
Fitch said the move reflected the "scale of the challenge facing Greece in implementing a radical fiscal and structural reform programme necessary to secure solvency of the state and the foundations for sustained economic recovery."
Tokyo was off 1.38 percent by late morning while Sydney was down 1.48 percent and Seoul was down 1.56 percent.
Hong Kong opened 1.53 percent lower and Shanghai was 0.80 percent down.
Among the biggest losers in Tokyo morning trade was beleaguered utility Tokyo Electric Power, which fell 9.26 percent by the break after the company posted the biggest ever loss for a Japanese non-financial firm.
TEPCO said it had lost a record $15 billion in the financial year ended March and its under-fire president resigned to take responsibility for the worst nuclear crisis since the Chernobyl disaster 25 years ago.
Shares in the utility fell to 333 yen, down nearly 85 percent since the day before the March 11 earthquake and tsunami crippled cooling systems at the Fukushima Daiichi nuclear plant, triggering reactor meltdowns.
Continued uncertainty over the direction of the company, amid fears over the size of compensation liabilities was hitting the shares.
"The government looks unlikely to reach a consensus on its financial support plan for TEPCO anytime soon, and that will weigh heavily on the stock," said Hideyuki Ishiguro, an investment strategist at Okasan Securities.
Machinery stocks also suffered following a Nomura Equity Research report Friday that projected a fall in demand for construction machinery in China.
"We now expect sales volume of hydraulic excavators in China (produced by overseas manufacturers) to fall 20 percent year-on-year in the fiscal year ending March 2012, versus our prior assumption of a 10 percent rise," Ishiguro said.
Hitachi Construction Machinery was down 4.8 percent and Komatsu lost 5.2 percent.
On the forex markets the euro fell to $1.4083 in Tokyo morning trading from 1.4155 in New York late Friday. The single European currency fetched 115.50 yen, down from 115.66.
The dollar rose to 81.99 yen from 81.70 yen.
The euro "may face continued selling pressure today, following last week's trend, against the backdrop of sovereign risks," Junichi Ishikawa, FX analyst at IG Markets Securities in Japan, told Dow Jones Newswires.
The euro dropped to an all-time low of 1.2348 Swiss francs in early trade before pulling back to 1.2367, against 1.2417 late Friday.
Fitch's assessment Friday of Greece's situation, did, however provide a glimmer of hope for bond holders, with the agency saying it expects substantial new money will be provided to Greece by the EU and IMF, and therefore "Greek sovereign bonds will not be subject to a 'soft restructuring' or 're-profiling' that would trigger a 'credit event' and default rating".
US stocks began the fall on Friday after the Greek downgrade.
The Dow Jones Industrial Average slid 93.28 points (0.74 percent) to end the day at 12,512.04.
Oil was down in Asian trade as investor sentiment took a hit partly from worries over weak US demand, analysts said.
New York's main contract, light sweet crude for July delivery, lost 95 cents to $99.15 a barrel, while Brent North Sea crude for July delivery dipped 70 cents to $111.69.
"Crude oil prices were weaker as US economic recovery is sputtering and fuel demand may drop," said Ker Chung Yang, commodity analyst from Phillip Futures in Singapore.
Gold opened in Hong Kong at $1,511.00-$1,512.00 per ounce, up from Friday's close of $1,503.00-$1,504.00.
Copyright AFP (Agence France-Presse), 2011