Japan's Nikkei share average posted its biggest fall in more than a month, dropping below major support at its 25-day moving average on Thursday after the Bank of Japan only offered minor tweaks to its easing strategy.
With monetary stimulus around the world overwhelmed by mounting signs of global slowdown, market players expect further downside as they fear companies will have to revise down their profit outlooks.
"(The BOJ's action) wasn't aggressive easing... this is not something that could change weak sentiment in the market," said Ryota Sakagami, chief equity strategist at SMBC Nikko Securities. "The Nikkei could fall to around 8,500."
The Nikkei declined 1.5 percent to 8,720.01, its biggest daily fall since June 8 and the sixth consecutive day of decline -- the longest such streak since early April.
It also broke below its 25-day moving average at around 8,790, leading many technical analysts to think the rally since early June's six-month low near 8,200 is over.
The broader Topix index fell 1.3 percent to 747.49.
The BOJ scrapped the 0.10 percent floor on its short-term bills purchase, which could possibly lead to further fall in short-term rates, but kept the size of its balance sheet unchanged.
The BOJ's move came hours after central banks in Brazil and South Korea cut rates and less than a week after monetary easing in China, the euro zone, and Britain.
"Central banks from Brazil and South Korea also cut rates but markets have hardly reacted positively, which may suggest one of the two things. Emerging economies are deteriorating very badly. Or these policy steps are considered too little too late," said Yasuo Sakuma, portfolio manager at Bayview Asset Management.
Sellers feel, comfortable
On Wednesday, minutes from the U.S. Federal Reserve also showed U.S. recovery might need to weaken further for a consensus to build within the Fed to buy more Treasury bonds to stimulate the economy.
Devoid of any near-term chance of confidence boosting large-scale stimulus from any of the world's major central banks, the market's mood is bleak.
"I can't see any catalyst for the market to rise. Sellers would feel very comfortable now," said SMBC Nikko's Sakagami.
Investors are also concerned that a global slowdown will force companies to cut their earning estimates as they start to report quarterly results.
Asahi Glass Co Ltd <5201.T> fell 6.6 percent to hit a 3-year low after the company cut its annual operating profit forecast due to dismal demand in Europe.
Hi-tech and industrial shares were weak after high-profile earnings warnings in the U.S. in recent days.
Electronics shares fell 1.9 percent, with loss-making firms faring poorly. Sharp <6753.T> tumbled 7.0 percent to a fresh 33-year low while Panasonic dropped 4.5 percent to 556 yen.
Construction machine maker Komatsu fell 3.7 percent to 1,734 yen.
But Shionogi & Co Ltd rose 4.5 percent after one of its experimental AIDS drugs, developed with partner GlaxoSmithKline, proved better than rival Gilead's market-leading Atripla in a late-stage clinical trial.
Only 310 shares rose while 1,243 shares dropped in the Tokyo Stock Exchange's main board.
Trading volume recovered to 1.84 billion shares, the highest level in about two weeks, though it is more than 10 percent below the average so far this year.
