Tokyo stocks fell one per cent in early trade on worries a worldwide economic slowdown could weigh on Japan's multinationals, and the rising yen sparked concern over exports, traders said.

"Sentiment remains bearish," said Kenji Karikomi, deputy general manager at Daiwa Securities Co. "There is lingering concern over a rout of global equity markets."

Hong Kong and Manila gave up two per cent each, with Australian shares stolid and Kuala Lumpur gaining seven per cent.

Tokyo's benchmark Nikkei average fell 1.14 per cent to 14,098.20 points. The yen stood at 134.50/4.60 to the dollar, off an earlier low of 132.95, erasing losses on shortcovering.

"Many people have said the yen's weakening would have adverse effects on the global economy so its recent strengthening is desirable," Japan's trade minister Kaoru Yosano told a news conference.

Buteconomic planning minister Taichi Sakaiya warned that Japan's monetary policy is at its limits, with any further easing unlikely to encourage investment.

"The issue is the speed at which the money is circulating. Japan is not fainting from a lack of blood, but is just suffering from low blood pressure," he said.

Market slides overnight in Latin America and the US intensified the pessimism. In New York, the Dow Jones Industrial Average fell more than 1.29 per cent overnight to close at 7682.22 points.

News of Japan's poor corporate performance continued to pile up with a newspaper reporting that Kawasaki Steel Corp will post a loss of over 100 billion yen.

Electronics major Hitachi Ltd warned on Thursday it faced its first loss ever, and Toa Steel said it planned to take a formal decision on applying for liquidation.

Australian shares opened little changed, with the All Ordinaries index down 0.52 per cent to 2,500.2.

"The miners are where all the action is," said Reynolds and Co dealer MarcusMueller. "There was a big short covering rally in most of the metals in overseas business."

Hong Kong's Hang Seng recovered to 7303.38, or 0.21 per cent down as an early round of buying in blue chips helped erase a 2.05 per cent fall after the completion of forced buy-ins by its securities clearing house.

"Short-covering has been completed. The market starts to follow overseas markets and Hong Kong fundamentals, but trading is likely to be sluggish and thin," said Antony Mak, sales director at Vickers Ballas.

Manila stocks were down 2.89 per cent at 1158.49, and Jakarta shares yielded 1.69 per cent to 329.132 points.

Singapore's Straits Times index was down 0.80 per cent to 806.20, off a low of 803.66 points, as bank stocks came under renewed pressure from Malaysia's moves to protect its economy from Asia's economic crisis.

Worries persisted over the exposures of Singapore banks to Malaysia after Kuala Lumpur imposed strong currency controls, brokers said.

Malaysian shares jumped 7.86 per cent to337.67 as local funds bought key index-linked issues, dealers said.

"With the foreign funds unable to sell because of the forex controls, it is easier to flush out any sellers, so local funds are buying," a local dealer said.

Dealers said foreign investors were unable to sell shares because capital controls levied earlier this week ban credit facilities to foreign brokers and banks from local brokerages, making settlements difficult.