Japan’s benchmark Nikkei 225 stock index plunged 12.4 percent in the latest bout of sell-offs that are shaking world markets as investors fret over the state of the U.S. economy.

The Nikkei closed down 4,451.28 points at 31,458.42. At its lowest the index sank as much as 13.4 percent. The market's broader TOPIX index fell 12.8 percent as selling picked up in the afternoon.

By percent, it was the second-largest fall of Nikkei since the "Black Monday" crash in October 1987, when the index lost 3,836.48 points, or 14.9 percent, which had been the worst previous decline.

A report showing hiring by U.S. employers slowed last month by much more than expected has convulsed financial markets, vanquishing the euphoria that had taken the Nikkei to all-times highs of over 42,000 in recent weeks.

The Nikkei 225 dropped 5.8 percent on Friday, making this its worst two-day decline ever.

Share prices have fallen in Tokyo since the Bank of Japan raised its benchmark interest rate on Wednesday. The Nikkei is now down 3.8 percent from a year ago.

One factor driving the BOJ to raise rates was prolonged weakness in the Japanese yen, which has pushed inflation to above the central bank's 2 percent inflation target. Early Monday, the dollar was trading at 142.39 yen, down from 146.45 late Friday and sharply below its level of over 160 yen a few weeks ago.

Japan's top government spokesman Yoshimasa Hayashi said it "will continue to stay on its toes and monitor market developments with keen interest".

"We're aware there are various evaluations regarding the stocks plunge this time around, and about the status of the Japanese economy, but the government will continue its efforts to completely break free of deflation and to transition to a growth-driven economy."

Stocks tumbled around the world on Friday after weaker than expected employment data fanned worries the U.S. economy could be cracking under the weight of high interest rates meant to tame inflation. Early Monday, the future for the S&P 500 was 1.5 percent lower and that for the Dow Jones Industrial Average was down 0.7 percent.

(Staff reporter, AP and AFP)

A man stands next to an electronic stock quotation board inside a building in Tokyo, Japan, on August 2, 2024. (Reuters)

Tokyo's Nikkei dives 12.4pc, suffers record points loss after US data fans recession fears