The Nikkei Stock Average saw its largest tumble in eight weeks on fears of higher taxes under Japan’s incoming Prime Minister Shigeru Ishiba as well as on a stronger Japanese yen.

Japan's benchmark Nikkei share average tumbled more than 4 per cent on Monday in reaction to a sharply stronger yen after perceived monetary policy hawk Shigeru Ishiba won the contest to become the country's prime minister.

Japanese stocks will likely tumble on Monday after Shigeru Ishiba’s surprise victory in the ruling party’s leadership race raised expectations that interest rates will increase.

Nikkei futures opened at 37,900, down 1,950 points, or 5.1%. It then lost as many as 2,220 points, or 5.8%, dropping to 37,630 at one point.

Japan's August retail sales climbed 2.8% year on year, beating Reuters poll estimates of a 2.3% rise, and up from a revised 2.7% rise in July.