Share prices in Tokyo plunged on Wednesday over growing concerns about a possible US default. Investors sent the benchmark index lower as lawmakers in Congress struggle to reach a debt ceiling deal.
The Nikkei Average ended the day at 29,544, down 639 points or 2.1 percent. Traders rushed to sell shares almost across the board from the opening. The index was down more than 800 points at one stage.
Stocks have had a bumpy ride over the past week. Shares rose on Friday after China's debt-laden Evergrande Group said it would meet a key repayment deadline.
But sentiment has since been on the decline. Wednesday's drop was compounded by rising US treasury yields as investors speculated the Federal Reserve would hike interest rates soon.