Nissan shares have hit a two-year low after the carmaker announced that its chairman Carlos Ghosn was arrested over claims of financial misconduct, including a failure to declare £34.5m in earnings.
Mitsubishi, of which Mr Ghosn is also chairman, was the biggest loser on the Nikkei, closing more than six per cent down, while Nissan declined five-and-a-half per cent.
Mr Ghosn will be sacked from Nissan after a board meeting on Thursday, its chief executive Hiroto Saikawa has said.
He added:” I feel despair, indignation and resentment.
“As the details are disclosed I believe that people will feel the same way as I feel today.”
Mitsubishi has confirmed it will also cut Ghosn loose while Renault’s board is due to meet soon to decide if he can remain its chief executive and chairman.
Industry observers say the future of the Nissan, Renault and Mitsubishi alliance, which shares costs and technology, is now threatened by the scale of the alleged wrongdoing.