Japan's Nikkei average dropped 3.6 per cent today, as growing global economic worries sent the yen higher and hit exporters, with shares in Toyota tumbling after a shock profit warning.
Trade was volatile, with the Nikkei falling as much as 7 per cent earlier but later coming within a breath of turning positive as investors sought to snap up big-name shares at low prices.
The Nikkei ended down 316.14 points at 8,583.00, its lowest close this month, after a week of turbulent trade that saw it finally eke out a gain of 0.1 percent for its second successive week of gains. The broader Topix lost 3.3 per cent to 879.00.
Toyota slid 9.2 per cent, dragging down other car stocks with it, after warning that profits this year would hit a 13-year low, as the financial crisis cripples demand for its cars and sends the yen higher.
The world's largest carmaker, hit by an early report of weaker earnings yesterday, has lost nearly a fifth of its value over the past two days.
"Toyota is a company that symbolises Japan, so there's a sense that its forecast cut really shows that all of Japan's economy is doing poorly," said Takahiko Murai, head of equities at Nozomi Securities.
Trading firms suffered a day after oil tumbled below $60 a barrel, with weakening demand underscoring the dire nature of the challenges facing the global economy. The International Monetary Fund said yesterday the world's developed economies are headed for the first full-year contraction since World War II and governments should ramp up spending.
The IMF now expects the US economy to contract by 0.7 per cent next year. It sees a contraction of 0.2 per cent in Japan's economy in 2009, down from its previous forecast of 0.5 per cent growth.
US stock futures edged higher and were up 1.2 per cent by late afternoon with some market players saying the gains were in anticipation of an advance on Wall Street and also helped to boost the Nikkei.
In another keenly awaited bit of news, Panasonic said after the close that it aims to make Sanyo its subsidiary, a move that will create Japan's largest electronics maker.