The Nikkei 225 was down 2.56 percent, or 529.86 points, to 20,181.05 in early trade, while the broader Topix index lost 2.45 percent, or 36.78 points, to 1,465.47.

The dollar dropped to 104.86 yen against the dollar in early Asian trade from 105.39 yen in New York on Friday.

The greenback's fall came after US President Donald Trump said he is raising tariffs on Chinese imports in response to Beijing's threat to impose an additional levy on American goods.

The yen is now at the highest level against the dollar since November 2016 when the US currency weakened on expectations of then-president-elect Trump's fiscal expansion policy.

"The Japanese market this week will inevitably see volatile movements as US-China relations seem to have gotten stuck in the mud with tit-for-tat announcements of fresh tariff hikes," Okasan Online Securities said in a commentary.

The fall in Tokyo shares was led by exporters, with Toyota losing 2.08 percent to 6,772 yen and Sony trading down 1.74 percent at 5,800 yen.