Tokyo stocks sank more than five percent Monday on fears over the new coronavirus and a plunge in oil prices that sent the dollar down against the yen.
The benchmark Nikkei 225 index dropped 5.07 percent -- the biggest fall since February 2018 -- or 1,050.99 points to close at 19,698.76, falling below the psychologically important 20,000 line.
The broader Topix index fell 5.61 percent, or 82.49 points, to 1,388.97.
The market opened sharply lower after Wall Street stocks tumbled Friday, with petroleum producers and banks falling especially hard.
"It was like panic selling," Shinichi Yamamoto, a broker at Okasan Securities in Tokyo, told AFP.
Driving the declines was a ferocious sell-off in the oil markets, sparked by top exporter Saudi Arabia slashing prices -- in some cases to unprecedented levels -- after a bust-up with Russia over production.
"A strong yen also depressed investor sentiment in Tokyo," Yamamoto said.
The dollar traded at 102.59 yen in Asian afternoon trade, down from 105.40 yen in New York on Friday.
The dollar temporarily dropped to the 101 yen level for the first time in more than three years.
A strong yen is a negative for Japanese exporters as it makes their products less competitive abroad and also erodes profits when repatriated.
Finance Minister Taro Aso told parliament he was watching foreign exchange rates and "staying on guard".
The key Nikkei temporarily plunged more than six percent but slightly recovered before the closing bell on bargain-hunting, brokers said.
BoJ governor Haruhiko Kuroda told parliament: "Investor sentiment is deteriorating as uncertainty widens due to the spread of infections of the new coronavirus."
He vowed to take "appropriate action without hesitation when it's necessary".
Aso also told parliament: "We think we have to respond with not only monetary policies but fiscal measures."
Just before the opening bell, the government said Japan's economy contracted more than initially believed in the October-December quarter, reflecting the country's economic fragility.
Oil-related shares slumped with Inpex Holdings down 12.95 percent at 766 yen and Japan Petroleum Exploration falling 12.69 percent to 1,974 yen.
Major exporters were sharply down. Nissan plummeted 8.22 percent to 389.2 yen with Toyota down 4.40 percent at 6,495 yen.
Sony lost 7.30 percent to 6,214 yen and Nintendo was down 3.95 percent at 35,930 yen.