Investor worries over the health of the international financial system were compounded after the US government announced it was taking a large stake in the ailing banking giant Citigroup, raising fears of greater state involvement in the banking sector.
Bank stocks hit
That hit banking stocks in Japan on Monday, with shares in Mitsubishi UFJ Financial Group and other major institutions helping to drag the Nikkei down.
Shares in Sony Corp bucked the trend on Monday however, gaining ground on news of an internal shake-up.
The company said on Friday that Howard Stringer, its CEO, would double up as president and directly oversee the company's ailing electronics division – a month after warning that it would post a record annual operating loss.
Elsewhere in the region South Korea's Kospi also opened more than 3 per cent lower on Monday.
Investors there were reeling over more poor economic data, showing that exports in February were down 17 per cent from a year ago, the fourth straight month of declines.
In Hong Kong share prices sank 3.75 per cent towards the middle of Monday's session.
Many investors in the territory are keeping a close eye on HSBC, which suspended trading in its shares pending an announcement of its results later on Monday.
The banking giant was one of the first to raise the alarm over the US subprime crisis and has weathered the financial storm better than many of its rivals.
Nonetheless, reports have said the bank is expected to unveil a new rights issue, looking to raise about $18bn as it seeks to boost capital reserves in the face of the global downturn.
There has also been speculation that the bank will announce that it will stop providing personal loans in the US and shut down hundreds of branches across the country.
Markets in Australia and Singapore also shed about 3 percent.