By Kosaku Narioka and Chao Deng

Nikkei down 21% this year; Hong Kong stocks lowest since 2012

Japanese shares were hammered Friday, capping their worst week since the 2008 global financial crisis, as a litany of worries weighed on investors, from slowing global growth to the health of the world's banks.

The Nikkei Stock Average finished down 11% for the week, its biggest weekly percentage drop since October 2008. For the day, the index ended off 4.8% at 14,952.61, the lowest since October 2014.

The Nikkei's year-to-date decline of 21% is now almost as steep as the losses in China's mainland stock market, the epicenter of the global stock selloff at the start of the year. Japan's market was closed Thursday when most Asian shares tumbled, contributing to a global slump.

Shares elsewhere dropped, as the extent of declines in Japan fueled worries that global market volatility was far from over.

Hong Kong's Hang Seng Index closed down 1.2% at 18,419.58, the lowest since June 2012. The index posted a loss of 5% for the week. Australia's S&P/ASX 200 closed off 1.2% and South Korea's Kospi fell 1.4%.

Chinese stock markets, closed for the weeklong Lunar New Year holiday observance, were expected to catch up with steep losses come Monday. The Hang Seng China Enterprises Index of mainland Chinese companies trading in Hong Kong fell 2% Friday and was off 6.8% for the week.

In Seoul, authorities suspended trading on the technology-heavy Kosdaq Index for 20 minutes after the benchmark fell by as much as 8.2% just before noon local time. The brake recalls similar triggers that stopped trading on the Chinese stock market earlier this year, as panic sent investors rushing for the exits. The Kosdaq benchmark was down by 6.1%.

The U.S. Federal Reserve's cautious stance on further rate increases has raised doubts about the global economy and led to the yen's sharp rise against the dollar, which has pummeled expectations for the competitiveness of Japanese exporters and hurt the country's stocks. The dollar was last up 0.3% at Yen112.15, after falling to Yen110.99 on Thursday. That was the lowest level since Oct. 31, 2014, when the Bank of Japan shocked markets by boosting its current bond-buying program.

Declines in Asian financial stocks Friday highlighted worries by some investors that the world is at risk for a systemic banking crisis.

On the Nikkei, financials were down 4.7%, in line with the broader market's decline. In Australia, financial stocks fared a tad worse than the overall market, down by 1.6%. The benchmark there entered a technical bear market earlier this week, marked by a 20% fall from its high last year, but recovered 1% on Thursday as major banks rebounded.

The Bank of Japan is partly responsible for the latest market gyrations, said Koji Toda, chief fund manager at Resona Bank's asset management division, which manages about Yen17 trillion ($151 billion). He said the BOJ's recent adoption of negative interest rates was raising concerns about the profitability of banks, leading to selloffs in their stocks.

"Market cap of banks are big. Banks are the cornerstone of the Japanese economy. It's hard to imagine the broader market indices going up on this," he said.

Some analysts are now expecting additional easing from Japan following last month's decision to move to negative interest rates. J.P. Morgan's chief Japan economist, Masaaki Kanno, said he anticipated the Bank of Japan would cut its policy rate in March or sooner, to negative 0.5% from the current minus 0.1%, plus increase Japanese government-bond purchases. This is the best option given the turmoil in Japanese markets and the strength of the yen, he said in a research note.

On Friday, telecommunication and consumer shares pulled down the Japanese market most, with the sectors each off more than 6%. Casio Computer(6952.TO) was down 7.9% while J. Front Retailing(3086.TO) fell 7.6%.

In the morning, Japanese Finance Minister Taro Aso said that the yen's moves had been rough and that rapid moves in the foreign-exchange market weren't desirable. He said he would watch foreign-exchange markets with close interest.

Gold futures , another haven, jumped to settle at the highest level in about a year at $1,247.80 a troy ounce overnight, but were last down 1.1% at $1,234.30 in Asia.

"We've seen some buying into the afternoon and perhaps that is a reflection that retail traders feel the Bank of Japan will be successful in waxing lyrical to stabilize the [Japanese yen] and the equity market," said Chris Weston, chief market strategist at brokerage IG in Melbourne. Still, "the tone in Asia has generally been downbeat."

"We've seen some buying into the afternoon and perhaps that is a reflection that retail traders feel the Bank of Japan will be successful in waxing lyrical to stabilize the [Japanese yen] and the equity market," said Chris Weston, chief market strategist at brokerage IG in Melbourne. Still, "the tone in Asia has generally been downbeat."

"Gone are the days where bad news was good as it portended of more dovish central banks and more cheap money on offer," Australia & New Zealand Banking Group wrote in a report to clients. It said some of the anxiety was likely chalked up to delayed disappointment in testimony by Fed Chairwoman Janet Yellen as she juggled a recognition of strength in the domestic economy and an acknowledgment of potential risks of heightened financial-market volatility.

-- Dominique Fong, Alastair Gale and Robb M. Stewart contributed to this article.

(END) Dow Jones Newswires

February 12, 2016 07:26 ET (12:26 GMT)