The Nikkei average slid 1.99 percent on Tuesday, extending losses into a sixth session, as a fall in commodities prices prompted heavy selling of Sumitomo Metal Mining Co and other energy and resources-related shares.
Advertising giant Dentsu Inc fell after it became the latest company to issue a forecast that missed market expectations, while news that two small real estate firms had postponed earnings announcements heightened concerns about accounting practices.
"We thought earnings forecasts would be a bit better than what companies have produced," said Katsuhiko Mori, a senior portfolio manager at Daiwa SB Investments' equity management department. "I expect the market rises to be limited at least in the first half of this fiscal year."
The Nikkei finished down 328.49 points at 16,158.42, its lowest close since March 16. The broader TOPIX index lost 2.19 percent to 1,644.97.
Metal smelter Sumitomo Metal Mining shed 9.2 percent to 1,530 yen after a sell-off in copper on the London Metal Exchange on Monday. Trading firm Mitsui & Co, which is expected to generate more than half of its profit this year from natural resources and engergy-related businesses, lost 6.5 percent to 1,673 yen.
INPEX Holdings Inc, Japan's biggest oil explorer, fell 3.9 percent to 1 million yen after US crude futures ended sharply lower on Monday in New York. After the market closed, INPEX raised its full-year profit forecast by 7.8 percent on soaring oil prices, after its INPEX Corp unit posted a 35 percent jump in 2005/06 profit.
Dentsu fell 4.1 percent to 354,000 yen after Japan's top advertising company forecast a weaker-than-expected 14 percent rise in operating profit in 2006/07.
Aiful Corp may face selling pressure on Wednesday as Japan's biggest consumer lender reported after the market closed a 13 percent drop in annual profit and forecast a further decline this year after regulators ordered a punitive suspension of its business this month. Aiful ended down 1.2 percent at 6,820 yen.
In the technology sector, Sony Corp was down 1.2 percent at 5,180 yen even though it said it will launch the world's first notebook personal computer equipped with a next-generation Blu-ray optical disk drive in Japan in June.
A few bright spots included truck maker Isuzu Motors Ltd, which advanced 1.6 percent to 390 yen after it posted strong earnings in late morning.
The Mothers market for small-cap companies tumbled 7.15 percent to 1,511.59.
Leopalace21 Corp plunged by its daily limit of 1,000 yen or 19.7 percent to 4,070 yen after the real estate agent announced that it would restate earnings for the past five years and would postpone its earnings statement by two weeks.
Likewise, Urban Corp plummeted 14.3 percent to 1,201 yen after the property firm said on Monday it would postpone its earnings announcement as auditing procedures have not yet been completed.
Trade volume rose to its highest level in about a week, with 2.06 billion shares changing hands on the Tokyo stock exchange. More than eight stocks fell for every one that rose.