The euro stood at $1.3337 in Tokyo trade, down from $1.3451 in New York late Friday. The European unit sagged to 102.75 yen from 103.12 yen.

The dollar was flat at 77.03 yen.

"The lack of progress (in efforts to tackle the European debt problems) prompted market participants to flee from the euro to buy the dollar," said Dai Sato, senior dealer at Mizuho Corporate Bank.

"Stock markets' slump is also negative for the euro," Sato added.

Greece said Sunday that its budget deficit should drop to 8.5 percent of GDP in 2011 from 10.5 percent last year, short of a 7.4-percent target initially fixed in June.

The announcement deepened fears of a default as the mark was set by European leaders as part of its bailout deal.

Rising inflation in Europe and concern over the global economy also hit global stocks. Asian markets took a hit Monday, with the Nikkei losing more than two percent.

After official consumer price index data on Friday showed a spike in eurozone inflation to 3.0 percent in September, the market is keeping eye on the European Central Bank's policy meeting on Thursday, dealers said.

The sharply rising inflation created a dilemma for ECB chief Jean-Claude Trichet, who must make a difficult call on whether to reduce interest rates to stimulate a weak economy despite rising prices.

"Market participants are watching what Trichet would say. If he helps raise expectation for future rate cuts amid the current situation despite rising inflation, it would give a boost to stocks," said Sato of Mizuho.

EU-IMF auditors returned to Athens on Thursday last week, four weeks after they abruptly left disappointed at Greece's lack of progress in implementing promised structural reform measures.

They pressed the government to undertake further austerity measures to reduce expenses and increase revenues.

Eurozone finance ministers are due to hold a meeting later in the day.

"The upcoming meeting is unlikely to give any drastic solution. Whether Germany would offer to cover Greece's deficit is key but the country is yet to be clear about its stance," Sato said.

The Bank of Japan's Tankan survey released Monday showed major Japanese manufacturers' business sentiment turned positive as the economy recovers from the impact of the March disasters, but it had little impact on the markets.

Copyright AFP (Agence France-Presse), 2011