A synchronised cut in borrowing costs by central banks around the world this week is seen as too little, too late, and investors doubt a meeting of the Group of Seven rich nations later on Friday can achieve much, with fears growing that the global economy is shifting towards recession.

US government debt and the yen have become refuges from the worsening financial crisis that overnight knocked the US S&P 500 stocks index down 7.6 percent to a 5-year low. But cash was ultimately king, with even Japanese government bonds being liquidated for funding.

Fears of a looming world recession that would sap demand for raw materials dragged oil prices down to a 12-month low below $84 a barrel.

"No one is buying. Fundamentals don't matter any more and there's no explanation for such a plunge," said Yoshinori Nagano, chief strategist at Daiwa Asset Management in Tokyo, of the selloff in Japanese stocks.

The Nikkei share average was down 10.6 percent, bringing the week's losses to more than 20 percent.

Unlisted Yamato Life Insurance Co filed for bankruptcy protection because of market turmoil, shocking investors who had thought Asia's financial sector, especially Japan's, was relatively stable compared with Europe and the United States.

The MSCI index of Asia-Pacific stocks excluding Japan was down 5.7 percent to the lowest since June 2005, and has fallen 19 percent this week alone.

Singapore's Straits Times index fell more than 7 percent, after data confirmed one of Asia's richest economies was in a recession.

The Chicago Board Options Exchange's Volatility index (VIX), seen as a fear index, hit an all-time high of 64.92, as investors scrambled to buy increasingly expensive protection against erratic price action.

With global equity markets declining with brutal swiftness, investors have rushed to US Treasury debt despite weakness in recent days on expectations for a glut of new issuance.

The 10-year note rose 21/32 in price, taking its yield to 3.70 percent from 3.78 percent. Rates on one-month T-bills fell to just 0.045 percent, from 0.080 on Thursday and 1.55 percent as recently as September 11, as the very short end of the market continued to act as a source of funding with other avenues all but shut down.