Share prices in Tokyo plunged on the first trading day of the month, following a broad sell-off in New York overnight. Investors are worried about a possible US default, as lawmakers in Congress struggle to reach a deal on the debt ceiling.
The Nikkei Average ended on Friday at 28,771, down 681 points, or 2.3 percent, from the previous day's close.
It was the first time in about a month for the index to finish below the 29,000 mark. The benchmark was down 770 points at one stage.
Risk-averse investors unloaded shares almost across the board.
The Nikkei 225 has ended lower on every trading day of the week. Analysts are pointing to what they say are potential risks for a global economic downturn.
In addition to the situation in Washington, they include power shortages throughout China and financial problems surrounding Evergrande Group, the country's second-largest property developer.