Nikkei continues to tumble

Koizumi repeated his determination to proceed with painful economic reforms

TOKYO, Japan -- Tokyo stocks stayed weak by midday Monday, with the benchmark Nikkei 225 index dropping 2.4 percent to 11,619.64.

This was down 288.75 points. By early afternoon it had slipped further to 11, 583.83, its lowest intraday level since March 15 when it hit a 16-year low of 11,433.88. It was also within sight of the 11,429 mark last seen in November 1984.

The broader TOPIX index was down 30.13 points or 2.52 percent at 1,165.12, dragged down by several large-cap banking shares including Mizuho Holdings

Elsewhere in the region, the Australian, Korean and Taiwan markets were also weaker, while New Zealand was marginally ahead.

Australia's benchmark S&P/ASX200 index was down 12.3 points to 3372.1, while in Seoul the Kospi was off 12.80 points at 524.91.

Big banks extend their losses

Banking giant Mizuho Holdings continued to decline Monday

In Japan, Mizuho Holdings and fellow big-bank UFJ Holdings extended their losses, given the lack of positive surprises from the weekend summit meeting of the Group of Eight nations in Italy.

Prime Minister Junichiro Koizumi repeated in Genoa his determination to proceed with painful economic reforms and avoid boosting public spending even if that meant slower growth in the near term.

"Mr Koizumi repeated his favourite slogan-no recovery without structural reforms-at the summit meeting. The same news means the stock market is unable to react," said Hiroyuki Nakai, manager of investment research at Tokai Tokyo Securities. "He may change the tone of his words only after the (July 29) Upper House election... But until then, the market will likely continue its warning," he said, adding that without extra fiscal spending, economic conditions could worsen further.

"Complaints are getting louder because opinions on how to solve the nation's bad-loan problem still differ within the cabinet, and the market has been waiting for a concrete scenario on that issue since May, but in vain," said Hajime Yagi, senior portfolio manager at MEIJI Dresdner Asset Management.

Index now well below 12,000 level

Last week, on July 18, the Nikkei closed at 11,892.58, falling below 12,000 for the first time in four months.

Mizuho, the world's biggest bank by assets, slid 9.47 percent Monday to 411,000 yen by midday, while Japan's number four banking group UFJ Holdings slipped 8.9 percent to 522,000 yen.

Banking shares have already been under heavy pressure because of nagging worries about a mountain of bad loans held by the nation's major lenders.

As part of Koizumi's reform plans, banks are set to scrub bad loans off their balance sheets in two to three years-a process expected to dent their bottom lines and fuel bankruptcies among struggling manufacturers.

Mirroring falls in major U.S. tech stocks, Matsushita Communication Industrial Co Ltd, Japan's top cellphone handset maker, lost 8.7 percent to 4,080 yen, wiping off Friday's 0.68 percent bounce.

Consumer electronics giant Sony Corp lost 1.96 percent to 7,020 yen, paring Friday's 2.29 percent rebound.

In Australia, resources stocks BHP Billiton, Rio Tinto and WMC were weaker, as was banking heavyweight National Australia Bank.

In Seoul, leading stocks SK Telecom and Samsung Electronics were down.

Reuters contributed to this report.