Tokyo stocks closed sharply lower Monday, with the benchmark Nikkei stock index falling 1.43 percent to a one-month closing low on renewed fears about the debt crisis in the eurozone following a credit agency stripping France of its triple-A rating.

Local brokers said that Standard & Poor's sweeping downgrade of nine countries in the sovereign debt-hit eurozone late last week rattled global markets, particularly France being stripped of its stellar treble-A rating. Market fears as to whether or not policy makers in the region had done enough to tackle the debt crisis subsequently grew, analysts said.

Along with France, Austria was also stripped of its stellar triple-A rating, while Italy, Spain, Portugal and Cyprus had their ratings cut by two notches and Malta, Slovakia and Slovenia, meanwhile, were lowered one notch. Germany, Belgium, and Ireland's ratings were kept the same.

Strategists here warned however that a number of eurozone countries are still on watchlists for review and global markets are bracing for more possible downgrades from other credit agencies, amid growing concerns that a key bond swap may result in a debt default for troubled Greece and that the European Financial Stability Facility (EFSF) may lose its triple-A rating status to a separate S&P downgrade.

"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.

Local traders also said that France's debt auction later in the day is also being keenly eyed by markets.

The 225-issue Nikkei Stock Average dropped 121.66 points from Friday to close at 8,378.36, while the broader Topix index of all First Section issues on the Tokyo Stock Exchange lost 9.36 points, or 1.27 percent, to finish at 725.24.

Japanese export-related issues, particularly those with a wide exposure to European markets took a pummeling as the euro fell to a fresh 11-year low versus the yen on Monday, clouding exporters' profit outlooks.

The euro depreciated 0.4 percent to 97.19 yen after dropping to 97.04, marking the single currency's lowest level versus the yen since December 2000. Dealers said Standard & Poor's sweeping downgrade of nine countries in the sovereign debt-hit eurozone late last week triggered the currency's drop.

The euro fell 0.2 percent to 1.2650 U.S. dollars in Tokyo from the close in New York on Jan. 13 when it hit 1.2624 U.S. dollars, marking its lowest level against the greenback since Aug. 25, 2010.

"Negative news keeps coming out of Europe. If other rating agencies such as Moody's follow S&P's downgrading, the euro will face further selling.'' said Yuzo Sakai, manager of foreign exchange business promotion at Tokyo Forex & Ueda Harlow.

The euro's decline negatively affects Japan's key exporters who rely on a weaker yen to boost profits made overseas. When the yen is strong versus its major counterparts, yields are eroded when repatriated on unfavorable exchange rates.

Subsequently, TDK Corp. fell 1.7 percent and Canon Inc. declined 2.2 percent. Konica Minolta Holdings Inc. lost 2.7 percent, while Sharp Corp. relinquished 2.9 percent to close at 637yen.

Consumer electronics giant Sony Corp. fell 2.3 percent to 1,297 yen, while smaller rival Panasonic Corp. retreated 2.1 percent to 616 yen, sinking to its lowest closing low since 1984.

Financial issues were also among today's notable decliners, with Sumitomo Mitsui Financial Group Inc. dropping 2.2 percent to 2,194 yen and Mizuho Financial Group Inc. losing 1.8 percent to 107 yen. Top-lender and Japan's largest bank by assets Mitsubishi UFJ Financial Group Inc., for its part, declined 2.7 percent to close the day at 325 yen.

Japan's brokerages were also pressured by the euro's retreat, with government-eyed Nomura Holdings falling 2.8 percent to 246 yen, while counterpart Daiwa Securities Group fell 2 percent to 240 yen.

Trading volume on Monday dropped to 1.34 billion shares on the Tokyo Exchange's First Section, down from Friday's volume of 1.69 billion shares, with declining issues outnumbering advancing ones by 1,039 to 480.