The index dropped 6.35%, or 843 points, to 12,445 to hit its lowest closing level since 3 April, the day before the Bank of Japan unleashed aggressive stimulus measures to boost economic growth.

The Nikkei has fallen 22% since its five and a half year high seen in May, taking it into bear market territory.

Traders are selling down equities and continuing on expectations Fed chairman Ben Bernanke will soon begin putting the brakes on the US’ quantitative easing programme as the economy recovers.

This forecast has seen the yen strengthen against the dollar in the last couple of weeks, after it depreciated since the BoJ stimulus was unveiled, leading many investors to short the currency.

The yen fell nearly 30% against the US dollar between November and May, causing exporters to report a jump in profits, which lifted the market.

However, the yen has risen more than 8% against the US dollar since 22 May.

Earlier this week the market jumped as Japan revised up its annualised growth rate to 4.1%, from an estimated 3.5%. It has been a volatile ride for investors in the market since the Prime Minister Shinzo Abe pushed the central bank to implement ‘Abenomics’.

The Topix fell 4.8% to 1,044.17 while, elsewhere in Asia, the Hang Seng was down 2.75% to 20,764, the Shanghai Composite lost 3% and the KOSPI fell 1.42%.

In the US, the Dow and the S&P 500 were both 0.84% lower.