All sectors witnessed intense sales, and all sub-indices of the 33 sectors in the stock market declined, except for the airlines index.
The Nikkei index lost 3.29 percent, the biggest percentage drop since February 26, to close at 28010.93, after touching its lowest level in a month. The broader Topix index lost 2.42 percent to 1,899.45 points, the biggest decline in four months.
After surprising expectations on Wednesday for the US central bank to raise interest rates earlier than expected, comments from St. Louis Federal Reserve Bank President James Bullard added to losses, as he said the shift to policy tightening was the fastest “natural” response to economic growth.
Wall Street’s three major indices closed sharply lower on Friday.
“The Japanese market is overreacting,” said Shuji Hosui of Daiwa Securities. Above all, raising interest rates is an indicator of economic recovery.”
Heavyweight stocks fell on the index, as Uniqlo, owner of Fast Retailing, lost 4.35 percent.
Chip shares pushed the Nikkei lower, with Tokyo Electron losing 4.02 percent, Advantest 4.49 percent and Shin Tsu Chemical losing 5.74 percent.
European shares fell on Monday, as mining and banking stocks bore the brunt of a sudden shift in the US Federal Reserve’s stance on monetary policy last week.
The pan-European Stoxx 600 index fell 0.6 percent to its lowest level in more than two weeks by 0704 GMT.
On Friday, the index halted a four-week winning streak after the Federal Reserve indicated that it may raise interest rates much sooner than expected.
Mining shares fell 1.7 percent, tracking the impact of falling metal prices, while banking shares lost 1.3 percent as investors took profits after a rally that lifted them more than 20 percent this year.