Asian markets veered sharply lower Wednesday, with Tokyo's Nikkei index tumbling nearly 7 percent, amid spreading pessimism over corporate earnings outlooks in the U.S. and at home.

As credit markets show signs of improving, investors are turning their attention to dismal forecasts from major U.S. companies and Japanese media reports of disappointing sales and profit results.

Asian markets opened lower after an overnight decline on Wall Street but extended losses as the day progressed.

Japan's Nikkei 225 stock average fell for the first time in three days, dropping 631.56 points, or 6.79 percent, to 8,674.69. Hong Kong's Hang Seng was down 6.2 percent, while South Korea's main index shed 5.1 percent.

"The credit crunch seems to be behind us, and we are shifting focus to corporate earnings and economic conditions, and clearly both are deteriorating," said Alex Tang, head of research at Core Pacific-Yamaichi in Hong Kong.

Particularly hard hit were Japan's megabanks, which slumped after The Nikkei financial daily reported that Mitsubishi UFJ would miss its net profit projection for the April-September period by about two-thirds due to higher bad loan costs and the falling value of its shareholdings. Mitsubishi UFJ Financial Group Inc. shed 8.8 percent and Sumitomo Mitsui Financial Group Inc. dived 8 percent.

A climbing yen added to the misery in Japan, dragging down exporters such as automakers and consumer electronics firms. A stronger yen reduces the value of overseas profits when repatriated to Japan. The dollar fell to 99.57 yen in Asia Wednesday afternoon, down from 100.23 yen late Tuesday.

Sony Corp. plunged 9.3 percent, Canon Inc. was off 6.1 percent and Panasonic Corp. stumbled 8.4 percent. Canon is due to report earnings on Monday and Honda Motor Co. on Tuesday.

South Korea's currency, meanwhile, continued to slide against the dollar. The won fell 3.1 percent against the U.S. dollar to 1,363, bringing its decline for this year to 31.3 percent.

Shares of Samsung Electronics Co., which said it has withdrawn a $26 a share bid to acquire U.S.-based SanDisk Corp., fell 2.1 percent.

Japan's Toyota Motor Corp. lost 6.9 percent amid media reports that the parent company this year will post its first decline in annual global sales in a decade. Hurt by slowing demand worldwide as well as the global financial crisis, Toyota will likely sell 8.3 million units in 2008 on the parent level — excluding subsidiaries and affiliates — down from 8.43 million units in 2007, The Nikkei said without citing sources.

Fears that the U.S. is headed into a severe recession were stoked as bellwether corporations such as chemical manufacturer DuPont Co., Sun Microsystems and Caterpillar Inc. downplayed their prospects for the coming months.

On Tuesday, the Dow Jones industrial average fell 2.5 percent to 9,033.66, while the technology-heavy Nasdaq composite index shed 4.1 percent to 1,696.68.

Those same dismal U.S. earnings outlooks also sent oil prices below $70 a barrel as investors shrugged off a looming OPEC production cut. Light, sweet crude for December delivery dropped $2.73 to $69.45 a barrel in electronic trading on the New York Mercantile Exchange by midday in Singapore.

Oil prices are now less than half of their peak near $150 a barrel in mid-July.

Staggering high lending rates at the heart of the credit crisis continued to fall, with the Hong Kong interbank offered rate, also known as Hibor, for three-month loans dropping to 3.14 percent from 3.35 percent.