1 min read.Updated: 20 Dec 2021, 12:28 PM ISTReuters
The Nikkei share average lost 2.13% to close at 27,937.81 in its biggest percentage loss since Nov. 26
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Japanese shares closed sharply lower on Monday after a rate cut in China's lending benchmark failed to lift investor sentiment while the spread of the Omicron coronavirus variant continues to stoke worries over an economic slowdown worldwide.
The Nikkei share average lost 2.13% to close at 27,937.81 in its biggest percentage loss since Nov. 26. The broader Topix fell 2.17% to 1,941.33.
China cut its lending benchmark loan prime rate (LPR) for the first time in 20 months, in a bid to prop up growth in the slowing economy.
"China's rate cut was to help improve the economy but investors were concerned that its growth slowed that much so the country needed to cut rates," said Ikuo Mitsui, fund manager at Aizawa Securities.
"Investors, who had expected the market to rise towards the end of the year, also sold stocks as the market is moving to a different direction."
Sentiment had already weakened after the U.S. Federal Reserve said it would accelerate a tapering of its bond-buying stimulus to end the programme in March.
The Bank of England surprised markets by becoming the first major global central bank to raise interest rates since the pandemic hammered the global economy.
Concerns over the impact of the Omicron variant also dented risk appetite. The Netherlands went into lockdown on Sunday and the possibility of more COVID-19 restrictions being imposed ahead of the Christmas and New Year holidays loomed over several European countries.