The stock market in Japan declined on Monday, tracking the move on Wall Street, which declined on Friday on profit taking by investors after recent rally. Financial stocks slipped after U.S. Treasury Secretary stated that big banks might need much more assistance than anticipated. Downgrading of Mitsubishi UFJ's outlook by Goldman Sachs and comments from the officials of major banks that they experienced a tougher month in March also sent financial stocks into a tailspin, raising fresh concerns on the stability of the global financial sector.

Realty stocks fell following bankruptcy filing by Azel Corp. Automakers declined after the U.S. government stated that bankruptcy might be the best solution for troubled automakers in the country, including General Motors, whose CEO Wagoner has been forced to quit the job.

The already weaker economic fundamentals and anticipation of further strain on the global economy dampened the glimmer of hope generated by the U.S. initiatives for reviving the economy. Investors also await the outcome of the G20 meeting later in the week.

On Friday, the Dow closed down 148.38 points or 1.9% at 7,776, the Nasdaq closed down 41.80 points or 2.6% percent at 1,545 and the S&P 500 closed down 16.92 points or 2% at 816.

In Asian trading, crude oil declined 2.31% or $1.17 a barrel to $51.21 a barrel. Light sweet crude for May delivery closed at $52.34 per barrel on the New York Mercantile Exchange on Friday, down $1.96 a barrel.

The market, having opened slightly lower than its previous close, continued to decline in the morning session. After a brief recovery in the afternoon session, the stocks continued its southward movement and closed at the day's low.

The benchmark Nikkei 225 Index lost 4.5% or 390.89 to close at 8,236 and the broader Topix Index of all First Section Issues declined 34.99 points, or 4.2% to close at 790.

On the economic front on Monday, industrial output in Japan plummeted by 9.4% in February compared to the previous month, the Ministry of Economy, Trade and Industry said. That was slightly worse than forecasts that called for a decline of 9.0% following the 10.2% decline in January. On an annual basis, industrial output dropped 38.4% compared to forecasts of a 38.1% decline after the 31.0% retreat in the previous month.

Real estate stocks declined after condominium developer Azel Corp. said Monday that it has decided to file for bankruptcy protection, with liabilities totaling 44.2 billion yen. The company has been severely hit by delays in payments of proceeds from sales of its fixed assets as well as the increasing reluctance to lend among financial institutions. Following the news, Mitsui Fudosan fell 9.16% and Mitsubishi Estate Co. is lost 9.00%.

Banking stocks slumped after Goldman Sachs advised investors to sell the stock of Mitsubishi UFJ Financial. The shares of the country's No.1 banker declined 7.00%. Other financials also declined sharply. Mizuho Financial lost 8.08%, Sumitomo Mitsui shed 4.69% and Resona Holdings moved downward by 4.51%. Brokerage Nomura Holdings dropped 4.90%.

Exporters also ended lower. Canon lost 3.97%, Sony fell 7.19%, and Sharp declined 5.05%. Automakers also ended weaker, Toyota decreased 3.68%. Honda Motor fell 6.69% and Mazda Motor Company lost 11.86%.

Hitachi declined 6.69% following news that it will close a Czech plasma television manufacturing plant due to falling prices and demand in the economic slowdown.

Toshiba Corp lost 8.04% after unveiling plans to take a 100% stake in its struggling liquid crystal display joint venture with Panasonic Corp.

Oil-related stocks moved downwards. Inpex decreased 4.22%, Nippon Oil lost 7.85% and Showa Shell fell 6.44%. Among trading houses, house Mitsubishi Corp. lost 4.61%, Sumitomo Corp. fell 4.79% and Itochu declined 5.44%.

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