On Monday, Japan's Nikkei average fell to a closing low of one-month after downgrades of nine European countries that escalated fears over the region's ability to end its debt crisis.

The market unease was added by an impasse in negotiations between Greece and private creditors on a debt swap deal that increased the risk of a Greek default in March when massive bond payments are due.

"Now markets are worrying about a possible downgrade of European banks and the region's bailout fund, which would make it even harder to raise capital," said Fumiyuki Nakanishi, general manager of investment and research at SMBC Friend Securities.

"It's as if Europe is in a dark spiral where people are discussing the worst case scenario for the euro zone," he said.

Japan's construction subindex .ICNST.T outperformed the broader market against the backdrop as investors remained bullish that the sector would benefit from post-quake reconstruction spending.

The benchmark Nikkei .N225 fell 1.4 percent to 8,378.36, back below its 25-day moving average near 8,467 after it closed above the technical level on Friday, while the broader Topix fell 1.3 percent to 725.24. The only support came from heightened expectations of the Bank of Japan's buying of exchange-traded funds (ETFs) in afternoon trade, according to market participants.