Asian shares extended decline for the sixth straight session on Friday as Japan's benchmark Nikkei index led the losses with a near 5 percent fall.
Asian markets came under severe selling pressure on Friday due largely to worries over the health of European banks.
Concern over the impact of central banks' monetary easing measures on banks' earnings compounded the already existing negative sentiments stemming from a slowdown in China and the emerging markets and a plunge in oil prices.
"The markets are clearly starting to price in a sharp slowdown in the world economy and even a recession in the United States," Tsuyoshi Shimizu, chief strategist at Mizuho Asset Management, told Reuters.
The analyst, however, ruled out a major financial crisis like the Lehman crisis but cautioned that market sentiment will remain downbeat for some more time.
Japan's Nikkei 225 plunged 760.78 points, or 4.84 percent, to 14,952.61, hitting its lowest close in more than 16 months.
Hang Seng index lost 1.22 percent while Australia's ASX dipped by 1.11 percent and South Korea's KOSPI decline d 1.41 percent.
Thailand's SET declined 0.32 percent and Jakarta Composite fell 1.29 percent.
Chinese and Taiwanese markets were closed for the Luna New Year holidays and will resume trade next week.
Japanese exports also suffered as yen rose, with Toyota dropping 6.8 percent, Nissan 5.82 percent and Sharp plunging 10.32 percent.
In contrast to the decline in equities markets, safe haven assets like Japanese yen, gold and government bonds soared.
The yen touched 110.985 to the dollar, a rise of almost 10 percent from its six-week low touched on Jan 29.
The 10-year US Treasuries were at their highest since August 2012, while gold surged more than four percent to one-year high of $1,262.90 per ounce.
Pricing in sharp slowdown
Following a rout in European banks, Asian financial institutions came under pressure, with Japan's Nomura falling 8.29 percent and Mizuho Financial shedding 3.54 percent.
"The markets are clearly starting to price in a sharp slowdown in the world economy and even a recession in the United States," Tsuyoshi Shimizu, chief strategist at Mizuho Asset Management, rold Reuters.
In India, a financials-led sell-off saw the benchmark BSE Sensex index falling over 3 per cent on Thursday. Indian shares recouped some of the losses in profit booking on Friday, marking a 0.47 percent rise.
"There are mounting concerns about the ability of central banks to continue to prop up asset prices ... That's part of why we're seeing assets across the board come under pressure," said Omer Esiner, chief market analyst at Commonwealth Foreign Exchange in Washington.