Building on last week’s 7% fall, investors dumped more stock last night to leave the index down 5.2% at 13,589 points.

From a peak of 15,919 points last week, the index has now shed well over 10%.

This leaves the Nikkei in correction territory, defined as a fall of 10% or more from its recent peak. Whether this is a good buying opportunity remains to be seen, but analysts said it has taken some of the heat out of the recent rally.

Other indices also suffered yesterday as nervous investors took profits from a host of indices.

The FTSE 100 closed down 2% at 6,627 points, while the German Dax was off 1.7%.

In the US markets also pulled back marginally from record highs, with the Dow closing down 0.7% and the S&P 500 off by the same amount.

Investors are growing more cautious after huge rallies in equity markets which have left indices around the world at multi-year or record peaks.

Last week’s suggestion by Ben Bernanke that the Fed’s asset purchase programme may begin to taper off later this year initially spooked investors, and since then markets around the globe have seen some of the largest one-day falls for many months.