The market's broader TOPIX index fell 12.8 per cent as selling picked up in the afternoon.
A report showing hiring by US employers slowed in July by much more than expected has convulsed financial markets, vanquishing the euphoria that had taken the Nikkei to record highs of more than 42,000 in recent weeks.
The Nikkei 225 dropped 5.8 per cent on Friday, making this its worst two-day decline ever.
Its worst single-day rout was a plunge of 3,836 points, or 14.9 per cent, on October 20, 1987, a day that was dubbed "Black Monday".
This Monday was gloomy enough: at one point, the benchmark sank as much as 13.4 per cent.
Share prices have fallen in Tokyo since the Bank of Japan raised its benchmark interest rate on Wednesday.
The Nikkei is now down 3.8 per cent from a year ago.
One factor driving the BOJ to raise rates was prolonged weakness in the Japanese yen, which has pushed inflation to above the central bank's two per cent inflation target.
Early on Monday, the dollar was trading at 142.59 yen, down from 146.45 late Friday and sharply below its level of more than 160 yen a few weeks ago.
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