The dollar tumbled against the yen, briefly touching Y95.77 in Tokyo, the lowest since August 1995, and recently trading at Y97.10. The US currency hit a record low against the euro as well, falling as far as $1.5905.
Investors also priced in a decline on Wall Street as S&P futures pointed to those markets heading south.
The Nikkei closed at its lowest since July 2005, falling 3.7 per cent to 11,787.51. The broader Topix slid 3.7 per cent to 1,149.65.
Investors looked at where leverage might be and were getting the hell out” and selling off shares in general amid intensifying uncertainty, one trader said.
Hong Kong’s Hang Seng index was badly hit, tumbling 5.2 per cent to 21,084.61, the lowest since August, and the index of Chinese mainland shares traded in the territory tumbled 7.2 per cent to 11,037.09. The Kospi managed to finish with a relatively milder 1.6 per cent decline to 1,574.44, while Australian shares slid 2.3 per cent to 5,087.00
The US Federal Reserve on Sunday night unexpectedly cut the discount rate for banks by 25 basis points and said it would allow primary dealers to access liquidity on similar terms to those available to banks at the discount window. However, the measures failed to reassure Asian stock markets.
Financial shares were hit across the board. In Japan, Mitsubishi UFJ tumbled 3.4 per cent to Y789, while Sumitomo Mitsui Financial slid 3.4 per cent to Y645,000. Australia’s Macquarie Group plunged 6.3 per cent to A$44.50 and Westpac Banking fell 3 per cent to A$22.31. South Korea’s Kookmin Bank lost 5.4 per cent to Won53,000, while in Hong Kong, HSBC fell 3.9 per cent to HK$118.10.
In Japan, exporters led the market down as the yen’s jump provided a double whammy for those companies that rely on the US for a significant amount of their profit. A higher yen makes those companies’ prices less competitive in an economy where consumer spending may be slowing.
The steep rise in the yen, which threatens to crimp economic growth should the currency remain at these elevated levels, comes as the government struggles to resolve a stand-off with the opposition party over a new head of the central bank, with the current governor’s term ending Wednesday.