By Kevin Buckland
TOKYO, March 13 (Reuters) - Japan’s Nikkei share average extended losses on Monday, led by banks as investors fretted over the potential fallout of Silicon Valley Bank’s (SVB) collapse last week.
Automakers also slumped amid pressure from a stronger yen, with Nissan and alliance partner Mitsubishi Motors pacing declines.
The Nikkei (.N225) sank 1.56% to 27,706.07 as of the midday recess, after dipping to 27,631.53, its weakest level since March 2.
The broader Topix (.TOPX) plunged 2% to 1,990.60, after touching 1,987.00 for the first time since March 1.
Banking (.IBNKS.T) was the worst performing sector among the 33 industry groups, dropping 4.75%. It was followed by insurance (.IINSU.T) , securities (ISECU.T) and other financials (.IFINS.T) , which fell between 2.87% and 3.93%.
Japan’s top government spokesman tried to allay fears over the SVB fallout, saying he didn’t see it affecting Japan’s lenders.
Transport equipment makers (.ITEQP.T) slid 2.49% as the yen pushed to a one-month high versus the dollar (JPY=EBS) .
The domestic rout follows mayhem on Wall Street on Friday, as banking shares slumped after SVB became the biggest bank failure since the financial crisis.
However, the U.S. Treasury and Federal Reserve announced a range of measures to support the banking system at the weekend, leading U.S. futures to point firmly higher on Monday.
Despite big declines for the Nikkei in the past two days that wiped out most of recent gains, Nomura Securities said the bottom for the Nikkei remains firm.
“Stocks will probably rebound to previous levels by Tuesday,” Nomura equity strategist Kazuo Kamitani, adding that investors will be keeping a close eye on the 25-day moving average at 27,713.
While the outlook for Fed policy has been clouded by SVB’s collapse, Kamitani said that U.S. economic data should remain the primary focus, and “ultimately, what investors need to pay attention to is CPI,” due on Tuesday.
Regional bank Shizuoka Financial Group (5831.T) slid 6.35% and Mizuho (8411.T) tumbled 5.58%.
Nissan (7201.T) slumped 5.18% after Citi slashed the former’s rating to sell. Mitsubishi Motors led all Nikkei decliners with a 7% plunge, after presenting updated business plans on Friday.

Japan's Nikkei drops as SVB collapse crushes bank stocks; autos slump