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Asian markets sank on Thursday after the Dow suffered its worst day of the year as fears of a global recession mounted with investors fleeing equities.
Tokyo's key Nikkei index nosedived nearly two percent at the open before recovering slightly to finish the morning 1.2% down.
The losses followed a dark day on European bourses and on Wall Street, with all three US benchmarks tumbling around 3% and US bond yields plunging as investors deserted stocks for safer Treasury assets.
"The Japanese stock market is sliding against the backdrop of sharp falls in US shares," Okasan Online Securities said in a note.
"Worries over the US economic recession grew, while negative economic data for China and Germany also prompted investors to downgrade their views on the global economy," Mizuho Securities added.
The yield on the 10-year US Treasury note briefly slid below the yield on the two-year bond, a so-called "inversion" that has been a reliable harbinger of recession for decades.
Coming on the back of an intensifying US-China trade war that shows no signs of resolution, the flight to bonds signalled the growing fears of a global recession.
"US-China trade tensions have metastasis into something more sinister by affecting global growth to such a large degree that bond markets are pricing-in a high probability of a worldwide recession", warned Stephen Innes, managing partner at VM Markets.
The trade war has hammered global demand, with Chinese industrial output hitting a 17-year low while investment and retail sales have also slowed in the world's number two economy.
Weeks of pro-democracy protests in Hong Kong have added to the climate of uncertainty, with Beijing referring to the increasingly violent demonstrations as "terrorism", stoking fears of a Chinese crackdown.
Shanghai and Jakarta fell 0.7% while Sydney plummeted more than two percent. Singapore also shed 0.9%. But Hong Kong edged up 0.1% after opening 1.5% down.
'Risk-toxic environment'
Economists have warned for months that the trade tensions were threatening investment and dampening global sentiment, which is already suffering due to China's slowdown and fears over Brexit's impact on Britain and Europe.
The release of German data showing that the Europe's largest economy contracted in the second quarter did not help matters, with Frankfurt slumping Wednesday to its lowest level since March.
"In this risk-toxic environment, the only thing that could help shift equity sentiment is if the Fed pulls back to back (rate cuts) out of their hat, something the markets are beckoning them to offer up but are unlikely to deliver," said Innes.
US President Donald Trump, who has repeatedly slammed the Federal Reserve for not cutting interest rates more sharply and frequently, blasted Chair Jerome Powell on Wednesday, calling him "clueless" for being too slow to lower rates.
But some observers wonder whether the Fed and other central banks will be able to do much to avert a downturn as the trade spat deepens.
