The Nikkei continued to underperform the broader market, after the Bank of Japan said on Friday it would no longer purchase Nikkei-linked exchange traded funds (ETFs).
The Nikkei share average fell 2.07% to close at 29,174.15, its biggest decline since March 4.
The broader Topix ended its eight-day winning streak, falling 1.09% to close at 1,990.18.
Renesas dropped as much as 4.89% after the key automotive semiconductor supplier said production at its fire-damaged plant will take at least a month to restart, and carmakers will start to feel a supply pinch in about a month.
The transport equipment index was the biggest drag in the market, followed by the insurance sector.
Honda Motor dropped 3.63% while Nissan Motor lost 3.7%. Car parts maker Denso shed 4.94% and Toyota Motor fell 3.26%.
The shares that have big weightings in the Nikkei average continued to reel from the Bank of Japan’s decision to buy only Topix-linked ETFs.
Fast Retailing dropped 4.54% while Daikin fell 4.02%.
“Today we have had a confluence of negative factors such as a fire at Renesas factory and the market confusion after the BOJ’s move. But fundamentally, the market is likely going through a correction on worries about rising U.S. bond yields,” said Shinichi Ichikawa, senior fellow at Pictet Asset Management.
Tokio Marine fell 5.55% on worries about its exposure to collapsed British supply chain finance firm, through its subsidiary in Australia. Reporting by Hideyuki Sano and Junko Fujita, additional reporting by Fumiya Mizuno; Editing by Devika Syamnath