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Japan's benchmark Nikkei stock index, the 225-issue Nikkei Stock Average, plunged more than 4 per cent on Monday after former Defence Minister Shigeru Ishiba was elected head of the ruling Liberal Democratic Party. 

The sharp decline saw the index dive more than 4.6 per cent at one point as Ishiba has shown a positive stance towards increasing taxes on financial income and corporate taxes, raising concerns about his economic policies in the stock market and leading to a wave of sell-offs, reports Xinhua news agency.

The strengthening of the yen against the dollar in the foreign exchange market also prompted broad-based selling, particularly in export-related stocks.

Ishiba's victory at the election came after Friday's market close, which saw the Nikkei index jumping 2.32 per cent during the day as the market betted on Economic Security Minister Sanae Takaichi to win, expecting her to adopt pro-growth economic policies if chosen.