TOKYO Japan's Nikkei share average fell 1.5 percent on Wednesday to a fresh three-month closing low as concerns grew that Greece could reject its hard-won bailout deal with international lenders that saved it from a disruptive bankruptcy.
The Nikkei was down 136.59 points at 9,045.06 to its lowest close since February 13, a day before the Bank of Japan unexpectedly eased policy by expanding its asset purchase programme to help the economy mired in deflation.
The BOJ's surprise move helped lift the Nikkei to a one-year high of 10,255.15 on March 27, but since then the benchmark has fallen 11.8 percent.
Market participants were wary after Greece's leftist candidate for prime minister, Alexis Tsipras, said bailouts must be rejected for a new coalition to be formed after Sunday's election, which could plunge the euro zone further into the sovereign debt crisis.
The benchmark Nikkei broke below its 200-day moving average near 9,058, and the next support level is 9,000.
A senior trader at a foreign bank said some investors were picking up Nikkei put options at the 9,000 mark ahead of options settlement this week, as it was a cheap way to play the market.
"These things expire tomorrow but the value of these things have gone up ... Europe is shaky, so maybe we can blow right through this 9,000 level," the trader said.
Social gaming company Gree Inc also weighed on the market as the heaviest traded stock by turnover on the main board, down 9.6 percent to add to sharp losses incurred since a weekend report that Japan's consumer agency may clamp down on online games that contain aspects of gambling.
The broader Topix lost 1.4 percent to 765.83 . About 1.8 billion shares changed hands on the main board, up from Tuesday's 1.6 billion shares.
Softbank Corp (9984.T) climbed 2.2 percent, however, after it and eBay Inc (EBAY.O) unit PayPal will form a joint venture to expand Japan's e-payments market by targeting users of Apple Inc's (AAPL.O) iPhone.
Earnings season also provided investors an incentive to cherry-pick stocks. Toshiba Corp (6502.T) advanced 1 percent after it forecast a 300 billion yen operating profit for the current fiscal year, topping market expectations.
Panasonic Corp (6752.T) gained 1.7 percent after the Nikkei newspaper said the company could forecast a net profit of around 50 billion yen for the year ending March 2013. The figure would be well above an estimated net loss of 780 billion yen for the year ended March 31.
NTT Data Corp (9613.T) fared less well, sinking 11.8 percent after the systems integrator said its operating profit forecast of 85 billion yen for the financial year came in below market expectations.
After the bell, Toyota Motor Corp (7203.T), Japan's top automaker, said quarterly operating profit jumped more than five-fold to $3 billion and would treble in the current year as vehicle production roars back from post-disaster lows. Shares of Toyota Motor ended flat.
Of the 83 Nikkei companies that reported January-March earnings before Wednesday, 63 percent of them met or beat analysts' forecasts, data from Thomson Reuters StarMine showed.
But concerns about instability in the euro zone as well as fears that the U.S. recovery is faltering and growth in China is slowing, have prompted investors to pocket gains after the Nikkei rallied more than 19 percent in January-March to log its best first quarter rise in 24 years.
Some analysts were optimistic that investor sentiment could improve if consumer demand grows over the summer period in the northern hemisphere.
"Construction and steel companies involved in the rebuilding will be worth watching," said Fumiyuki Nakanishi, general manager of investment and research at SMBC Friend Securities.
"The economy could also get a boost from consumption of 'cool biz' products if we see energy shortages this summer."
The construction sector .ICNST.T carries a 12-month forward price-to-earnings ratio of 12, while it is 12.5 for the iron and steel sector .ISTEL.T, data from Thomson Reuters Datastream showed. That compares with the Topix's 12.1.
(Additional reporting by Sophie Knight; Editing by Jacqueline Wong)