There was some relief for investors, however, as the impact of debt-ridden Nippon Credit Bank Ltd's enforced nationalisation announced on Sunday was limited, brokers said.

The 225-issue Nikkei average of the Tokyo Stock Exchange lost 294.02 points to end at 14,111.62. The Topix index of all shares in the first section closed down 17.85 points at 1,100.31. Volume was 319 million shares, compared with 787.3 million shares on Friday.

Investors turned sellers from the outset following the Bank of Japan's gloomy quarterly Tankan survey and concern over US share prices, brokers said. In the central bank's Tankan survey on corporate confidence, the key diffusion index for large manufacturers fell to minus 56 for the three months to December, its worst level since February 1994. Investor reaction to the government takeoverof Nippon Credit Bank was muted as the move had been largely factored into the market at present levels, brokers said.

``The direct impact of the Nippon Credit Bank-related move was much smaller than had been expected, except for the fact that it triggered selling among companies which are in heavy debt,'' said a broker at Okasan Securities Co Ltd.

Investors are expected to wait to see how the credit crunch weighs on Nippon Credit Bank's clients, as well as to clarify how foreign investors evaluate the move, brokers said. The government's tough stance `shown in the Nippon Credit Bank issue may prompt banks to upgrade acceptance of public funds, as they must be feeling increased pressure to restore soundness to their balance sheets, which may positively affect the market,'' a broker said.

Share prices were further pressured in late trading on heightened concerns over the short-term prospects for Wall Street, brokers said.

The Dow Jones Industrial Average dropped 2.16 per cent last week on growingconcern over prospects for large US companies and uncertainty over the impeachment proceedings against President Bill Clinton.

Bank shares closed sharply lower in Tokyo, with the government's move to enforce nationalisation on Nippon Credit Bank triggering investor concerns over possible losses from other bank failures. Yasuda Trust dived seven yen, or 7 per cent, to 108 yen, while Sumitomo Trust dropped 23 yen to 332, a 6.5-per cent fall.

Telecoms closed mixed, with NTT down 4,000, or 0.5 per cent, at 882,000 ahead of the government pricing of the sale of its fourth tranche in the giant. NTT DoCoMo closed flat at 4.62 million. High-technology leaders closed broadly lower on late profit-taking.