Japan's premier share index has slipped almost 5% to below 11,000 on fears for global growth.
The sharp slide marks a sixth straight day of falls for the Nikkei 225.
The index closed down 554.12 points at 10,884.7, following fears that solid US jobs data means the Federal Reserve will soon raise US interest rates.
News of a possible bomb threat to the US embassy in Tokyo, as well as soaring oil prices and worries about China's boom, also helped sour the mood.
The last time the Nikkei finished below 11,000 was in February this year.
A broader measure of Japanese equities, the Topix index, fell 5.8% - the sharpest decline since 11 September 2001.
Among the main fallers were mobile firm NTT DoCoMo, down almost 14%, and megabank Mizuho, down 13%.
According to analysts, the main catalyst for the sell-off was the unexpectedly good jobs data released in the US last week.
The 288,000 new jobs created in April, according to the US Commerce Department, mean the odds have shortened on a rise in US interest rates this year.
That, investors fear, could check growth among Japan's exporters.
"We've seen a great deal of flows from overseas investors and retail investors, and I think today they were just exiting the scene," Jim McGuinness at Mizuho Bank in Tokyo told the BBC's World Business Report.
"I think we're in a long term uptrend here in Tokyo, but I don't think anything goes up in a straight line, so we could see a bit of instability in the summer."
Interest rates in China are also a concern, as the government in Beijing tries to slow down economic growth.
And news that the US embassy in Tokyo was warning US citizens via e-mail that it had been threatened with a bomb attack this week - although it acknowledged that it could not determine whether the threat was credible.