Japanese stocks tumbled to their lowest levels in 26 years on Monday. Most other Asian markets also fell heavily on fears of a global recession.
The yen continued to gain even after Group of Seven finance ministers on Monday singled out the excessive volatility of the currency, which is battering Japanese share prices.
The Nikkei index ended down 6.4% - its lowest close since 1982.
Japan pledged fresh measures on Monday to try to shield the economy from the financial crisis.
Prime Minister Taro Aso announced more government money to help banks which hit difficulties and tighter curbs on the practice of short-selling shares.
Japan is the world's second largest economy.
However, the G7 group warned the yen poses a threat to financial and economic stability.
But Mr Aso says there is no major cause for concern.
The yen remains near a 13 year high against the United States dollar.