A share prices board in Tokyo on June 1, 2015. [Illustrative image] Image Credit: AFP

Tokyo's benchmark Nikkei 225 index dived more than five percent in morning trade Tuesday amid rising doubts about the US economy and fears sparked by a US government funding crisis.

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The Nikkei index dropped to as low as 19,149.34, down 5.04 percent or 1,016.85 points.

Japan's Nikkei slumped to a 20-month low on Tuesday after a deepening slide on Wall Street heightened investors' aversion to risk.

The broader Topix was 4.55 percent lower at 1,420.31 after touching 1,420.82, its lowest since November 2016.

Wall Street stocks extended their steep sell-off on Monday, with the S&P 500 dropping nearly 15 percent so far this month, as investors were rattled by the U.S. Treasury secretary's convening of a crisis group and by other political developments.

Many of the financial markets in Asia, Europe and North America are closed on Tuesday for Christmas Day.

"Negative sentiment has replaced logic, as is often the case during a sell-off. A third of the selling is induced by panic, another third by loss-cutting and the remaining third by speculators trying to make a profit from the market rout," said Takashi Hiroki, chief strategist at Monex Securities in Tokyo.

"The sell-off is triggered almost entirely by developments in the U.S. markets, rather than by negative factors unique to the domestic market." Treasury Secretary Steven Mnuchin called top U.S. bankers on Sunday amid the pullback in stocks and said he was calling a meeting of financial regulators to discuss ways to ensure "normal market operations".

Wall Street also grappled with the U.S. federal government shutdown and reports that President Donald Trump privately discussed the possibility of firing the Federal Reserve chairman.

Blue chip shares fell across the board, with Toyota Motor Corp falling 5.1 percent, Sony Corp shedding 4.5 percent, Nintendo down 4.3 percent and Mitsubishi UFJ Financial Group losing 4 percent.

Defensive shares such as consumer staples, healthcare and utilities were unable to withstand the selling pressure.

Convenience store operator Familymart UNY Holdings dropped 5.3 percent, healthcare product maker Kao Corp declined 5.7 percent and Tokyo Electric Power Co Holdings retreated 3 percent.

All of the Tokyo Stock Exchange's 33 subsectors were in the red, led by precision machinery and pharmaceuticals .