The global slowdown has hit Japanese factories hard, with big firms such as car maker Toyota and electronics firm Sony slashing production and cutting jobs.

"A continued flow of bad economic data is pointing to steeper global recession, worsening concerns about corporate earnings," Lee Sun-yeob, a market analyst at Goodmorning Shinhan Securities, told the Reuters news agency.

A flood of negative news about international banks also reignited worries about the financial system, weighing on the markets.
 
"Increasingly bearish prospects for global banks' results are also pressuring sentiment," Lee said.