The bears came out to maul Asian markets yesterday, with Tokyo taking much of the pain, as traders there returned from a one-day break only to dash back out.
The benchmark Nikkei 225 dived 4.8 per cent to round out the bourse's worst week since 2008.
The trigger was a sharp strengthening of the yen to 16-month highs against the US dollar as investors flocked to safe-haven assets, prompting the central bank to consider an intervention.
The Singapore market showed less volatility, ending the day flat after trading within a narrow band. Others were not so lucky. Hong Kong, which plunged 3.9 per cent on Thursday, fell another 1.2 per cent, while Seoul dropped 1.4 per cent.
Tokyo's turmoil began as punters bailed out of Japanese exporters, whose profits will be hurt by a stronger yen.
Currency concerns have overshadowed the Bank of Japan's shock move late last month to cut interest rates to below zero, a step which initially lifted stocks but has since garnered more criticism than praise. "I think the adverse impact from negative interest rates will be bigger than the positive impact on the economy... A negative impact on banks could be big," said Mr Kazuhiko Ogata, chief economist for Japan at Credit Agricole CIB in Tokyo, in an interview with Reuters. "There is a risk that worries about the financial system will increase."
Markets are losing faith in central banks and their ability to stabilise the situation.
MR MATTHEW SHERWOOD, head of investment strategy at financial advisory group Perpetual in Sydney
Worries over the banking sector, not just in Japan but globally, are rising, with investors uneasy about how much exposure lenders have to the slumping oil and gas sector.
Traders are also fast losing faith in banks' ability to sustain, much less grow, profits after years of record low interest rates and now, moves towards negative rates.
After Japan's adoption of a negative rate, Sweden this week cut its interest rates deeper below zero.
A comment by US Federal Reserve chairman Janet Yellen that negative interest rates could be a potential policy tool for the US if faced with an economic slowdown only added to traders' dismay.
Mr Matthew Sherwood, head of investment strategy at financial advisory group Perpetual in Sydney, told Bloomberg: "Markets are losing faith in central banks and their ability to stabilise the situation."
In South Korea, the benchmark Kospi plummeted to its lowest close in almost seven months, after Seoul's move to shut down the jointly run Kaesong industrial park in North Korea. This led to a selldown of firms such as Romanson, which sank 8.8 per cent.
The Kosdaq exchange for smaller stocks was suspended for 20 minutes as it plunged more than 8 per cent before noon. The index ended the day 6 per cent lower.
With China set to reopen its markets on Monday after a week-long break, IG market strategist Bernard Aw said more blood will likely be spilled on the trading floor.
"Can things get worse? To be honest, we may not have seen the worst yet. The performance of Chinese equities when they return next week will be key to whether the global stock rout would go on or not," he said in a note yesterday.
"China is pretty much in its own world due to the relatively closed- off capital markets despite recent liberalisation moves. In contrast, the world is considerably affected by what goes on in China. If Chinese equities head deeper south next week, the global market is quite certain to follow."