Tokyo shares sank more than 12 per cent, undermined by a rebounding yen and weak U.S. jobs data that fueled fears of a recession in the world's biggest economy, AFP reported.
The benchmark Nikkei 225 fell 12.40%, or 4,451.28 points, to 31,458.42, its biggest drop in history, while the broader Topix lost 12.23%, or 310.45 points, up to 2,227.15 points.
The yen rose to 141.73 against the dollar, a level not seen since early January, from 146.52 yen in New York on Aug. 2.
The Japanese currency quickly rallied from levels near 162 in early July, its weakest since 1986.
A stronger yen is a negative factor for Japanese exporters, and the recent appreciation has been fueled by central bank decisions that have reversed trends of recent years.
Last week, the Bank of Japan raised interest rates for the second time in 17 years, with talk of another hike imminent, while the US Federal Reserve hinted at a rate cut as early as September.
Daiwa Securities said losses in Tokyo reflected "deepening concerns about the uncertain US economy".
"Investor sentiment eased as US employment data for July came in lower than expected, reinforcing concerns that the US economy is slowing more than expected," IwaiCosmo Securities said.
"The market was also burdened by the appreciation of the yen against the dollar and expectations for optimistic financial results of exporters," the broker added.
On Aug. 3, the Dow Jones Industrial Average ended down 1.5 per cent on Wall Street as data showed the U.S. labour market cooled much more than expected in July.
European stock markets also closed sharply in the red.
To calm market volatility, futures trading was halted for 10 minutes as a so-called "interrupter" on the Nikkei and Topix indexes on the Osaka Stock Exchange in the western Japanese metropolis, an exchange official said.
Semiconductor shares fell, with Tokyo Electron down 18.48% to ¥22,055 and Advantest down 15.84% to ¥5,313.
Toyota fell 13.65% to ¥2,232. | BGNES
