A worse-than-expected growth rate for the Japanese economy in the second quarter sent the Nikkei index of the Tokyo stocks to a one-and-a-half month low on Monday.
The 225-issue Nikkei Stock Average closed down 95.76 points, or 0.70 percent, from Friday's 13,519.43, mainly led by declines in share prices of real estate, consumer finance and securities firms.
The broader Topix index of all First Section issues on the Tokyo Stock Exchange was down 6.29 points, or 0.55 percent, at 1, 134.62.
Investors were worried about the Japanese economy after official figures released earlier in the day showed that the world' s third largest economy was slowing down in the second quarter.
According to a preliminary report of the Cabinet Office, the Japanese economy grew at an annualized rate of 2.6 percent in the second quarter, falling short of market expectations.
Analysts had predicted an annualized growth rate of 3.2 percent. The latest figure was also much lower than a downwardly revised 3. 8 percent rate in the first quarter.
Compared with the previous three months, the world's third largest economy expanded by 0.6 percent in the period from April to June, marking the third consecutive quarter of growth.
Consumption, the main driver of Japan's economic growth, rose by merely 0.8 percent, while exports registered a strong growth of 3.0 percent, thanks to a weaker yen as a result of the drastic monetary easing by the Bank of Japan.
The slower growth in the second quarter aroused doubts over the impact of the economic stimulus program launched by Japanese Prime Minister Shinzo Abe, dubbed as "Abenomics".
Adding to the fear is a separate report released Monday that showed Japan's industrial output registered the first drop in five months in June.
The Ministry of Economy, Trade and Industry said the output in the industrial sector declined by 3.1 percent on a seasonally adjusted basis compared with May, revising the data from the initial reported 3.3 percent decline.
In an effort to diffuse worries in the markets, Japanese Economic and Fiscal Policy Minister Akira Amari told reporters that effects from the government's economic policies have been " emerging" and the second-quarter growth looks "good".
Analysts said the slowing growth may delay the Abe government's plan to double sales tax to 10 percent by 2015, a key measure to consolidate public finance of the debt-laden country but thought to be detrimental to short-term growth.
In response to the economic growth data, Abe insisted that the Japanese economy is "steadily recovering," vowing to "keep taking all necessary steps to ensure an economic recovery" but leaving no clue on the timing of the expected tax rate hike.