Tokyo Stock Exchange’s Nikkei Stock Average plunged more than 7 percent in early trading on Monday following a broad sell-off in New York at the end of last week.
Tokyo stocks opened sharply lower, with the benchmark Nikkei 225 tumbling over 2,500 points at one stage.
Shares fell across the board as weaker-than-expected US jobs data on Friday stoked fears that the world’s largest economy is weakening.
Meanwhile, the Japanese yen strengthened to a six-month high, briefly reaching the lower 145-yen level against the dollar.
The prospect of a narrowing interest-rate gap between Japan and the United States is prompting investors to sell the dollar and buy the yen.
Worries over a possible slowdown in the US economy is adding fuel to investors’ views that the Federal Reserve may quicken the pace of rate cuts.
Market players say speculation is rife that the Bank of Japan may raise interest rates again this year.