The Nikkei has fallen heavily again today (February 4th) and is now close to a three-month low.
After recording strong gains during 2013, outperforming major global rivals such as the Dow Jones and the FTSE 100 in London over the year, the index has collapsed in 2014.
The Nikkei ended the day more than four per cent down, with investors selling off their profits as a result of growing concerns about the impact of the US Federal Reserve starting to wind down its quantitative easing scheme.
But it was not just the Nikkei that took a hit during trading today, as the Hong Kong Hang Seng fell by 2.3 per cent and the Kospi in South Korea was 1.6 per cent lower.
Stock markets around the world have also been hurt by the uncertainty over the effect of the Fed's move, with the Dow Jones and the S&P 500 both dropping by two per cent during trading on Monday.
Indexes performed well in 2013 as the Fed held off from reducing its support for the US economy, but as the recovery has taken hold, it has chosen to begin withdrawing its quantitative easing programme.
New Fed leader Janet Yellen has taken over from Ben Bernanke at the body and she appears keen to bring the US economy under control without so much support from the organisation.
"What is of concern is that there appears to be a substantial overhang of foreign ownership in the Japanese stock market," said Stefan Worrall, director of equity cash sales at Credit Suisse in Tokyo, told Reuters.
The Nikkei lost more than 600 points in total and ended the session at 14,008.47, while the fall experienced by the S&P 500 on Monday was its worst daily performance for over six months.
"Many market players are trying to determine whether the recent declines are just a short-term correction or a change of tide in the market," said Kenichi Hirano, a strategist at Tachibana Securities.
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