The Japanese stock market index tumbled to a three-year low as fears mounted about the economy relapsing into recession. The Nikkei 225 index dropped by 1.5 per cent to close at 14,813.
"We are gravely concerned that the share average fell below 15,000," said Tomio Tsutsumi, deputy minister at Japan's Ministry of International Trade and Industry . A warning from the huge life insurance company, Nippon Life, that this was not the time to buy Japanese shares added to the gloom.
In marked contrast to the upbeat message of its Tankan survey of business intentions last Friday, the Bank of Japan appeared to concede that the economy might not grow in 1995.
Its governor, Yasuo Matsuhita, said in Tokyo that "since the degree of the yen's appreciation has been larger than that seen last year, there is concern that the negative influence on the economy may be similar to that experienced in 1993".
The economy declined then by 0.2 per cent.
In the United States, Robert Rubin, Secretary of the Treasury, called in a radio interview for Japan to boost its economy and - in particular - to deal with the crisis in the banking sector.
Such a stimulus "would be helpful to the banks, to real estate values, helpful to the stock market" he said.
"I think they have to face their bank issues in a forthright fashion."
On a day when there was no breakthrough in talks held between the Japanese and the US at the World Trade Organisation over the US threat to impose trade sanctions on imports of luxury cars at the end of June, Mr Rubin reiterated the US hard line.
"I don't think we should shy away from facing this trade problem which has festered so long and got worse and worse."
The danger in the latest fall in share prices is that it will exacerbate the vicious circle of financial and economic weakness the economy is caught in. The Ministry of Finance revealed last week that banks' total bad debts amounted to a colossal Y40,000bn yen (pounds 300bn). This burden has weakened the ability of monetary policy to stimulate the economy, since banks have been reluctant to lend funds.
However, a weakening stock market reduces the value of banks' capital, making them even more unwilling to step up lending.
At the same time, it adds to the "safety-first" climate of big investors such as life assurance companies, which have been unwilling to invest Japan's big current account surplus in other currencies.
This is keeping the yen some 15 per cent higher on a trade-weighted basis than it was at the beginning of the year.
The rise in the yen has, in turn, bashed an incipient economic recovery on the head.
Gerard Lyons, economist at DKB International, warned that there could be "a self-fulfilling downward spiral" as economic gloom fed through to the financial sector and that, in turn, weakened the economy.