The Australian stock exchange was also down by 2.4 per cent, declining for its tenth consecutive session, while the key index in the Philippines fell 2.5 per cent, and Singapore's market was down 1.6 per cent.

 

Chinese stocks largely bucked the trend however, with the main Shanghai index recording only a slight drop of 0.31 per cent.

 

Reporting from Beijing, Al Jazeera's correspondent Melissa Chan said investors appeared to still have a lot of confidence in the Chinese economy, making it for now at least largely impervious to what is happening in the rest of the world.

 

The falls came as the US economic outlook worsened, raising concerns about a contraction in the US economy and driving investors to sell off stocks in Asia's big exporters.

 

Investors around the world are jittery about the full extent of the US sub-prime mortgage crisis in the US, sparking a credit crunch and billions of dollars of losses at major American investment banks Citigroup and Merrill Lynch.

 

Adding to jitters a US government report showed a sharp and unexpected decline in manufacturing activity, helping send the Dow Jones industrial average sliding 2.5 per cent Thursday to its lowest level since last March.

 

Japan's finance minister said on Friday that concerns were growing as share prices fell in Tokyo on the heels of the overnight fall on Wall Street.

 

Fukushiro Nukaga however said he saw no need yet to fret over domestic stock price falls and the strengthening of the yen.

 

The Japanese yen hit a four-month high against the euro as investors used the yen to finance purchases of assets which offered higher returns elsewhere.

 

Stimulus package

 

On Thursday, facing a steep decline in US stocks, Ben Bernanke, the US Federal Reserve chairman, urged Congress to pass new emergency measures to revive the flagging economy.

 

US legislators are debating a $150bn package of tax breaks, extra spending and welfare even as some economists said the country may have already fallen into a recession.

 

Bernanke however only partially supports the stimulus package warning that a delay in effecting such a plan could do more harm than good.

 

"It needs to be done quickly," he said, "in the sense that for every dollar put in to this needs to have a reasonable response."