The benchmark Nikkei 225 index at the Tokyo Stock Exchange lost 201.99 points to 8,535.67, its lowest close since April 28, 2009, as selling hit major exporters.

The broader Topix index of all first-section issues dropped 14.44 points or 1.91 percent to 741.26.

Global markets suffered heavy losses on Friday after the shock resignation of the European Central Bank chief economist Juergen Stark, which signalled more turmoil in the eurozone.

Stark, known as an anti-inflation hawk, was critical of the bank's controversial programme of buying bonds issued by heavily indebted countries such as Greece who find the markets closed to them.

"Disagreements within the ECB are raising concerns that the debt problem resolution will be further delayed," said Yutaka Miura, senior technical analyst at Mizuho Securities.

"Investors are also worried that a Greek default will weigh heavily on German and French banks," he told Dow Jones Newswires.

The euro hit 104.27 yen in Tokyo afternoon trade, its lowest level since June 2001, amid concerns over a possible Greek debt default without a new tranche of a rescue package by the end of the month.

Investors await further trading cues from Europe this week, said Hisatsune Kobayashi, general manager of global investment strategy at SMBC Nikko Securities.

"We probably won't see anything decisive coming out of Europe on the (Greek) sovereign debt front until it reaches a breaking point," he said.

Suzuki Motor closed down 2.75 percent at 1,484 yen after it had received notice from its partner Volkswagen of Germany of an alleged infringement of a cooperation agreement.

Denying the allegation, the Japanese automaker said after the market close that it had decided to end its capital and business partnership with Volkswagen.