Asian stock markets plunged on Friday following Japan's massive earthquake, with Tokyo ending down 1.72 per cent and Hong Kong down 1.55 per cent, although the yen stabilised after an initial fall.

Tokyo's Nikkei ended 179.95 points lower at 10,254.43, Hong Kong dropped 365.11 points to 23,249.78 and the Shanghai Composite Index ended down 0.79 per cent, or 23.34 points, at 2,933.80.

Sydney fell 1.17 per cent, or 54.90 points, to 4,644.80.

It was too early to assess the economic damage, but the quake, centred off Northeast Japan, had a magnitude of 8.9, making it the country's biggest ever and the seventh largest on record globally. It unleashed a 10-metre high tsunami that sparked fears of destructive waves across the Pacific Ocean.

The market was already weighed down by unrest in the west Asia, eurozone debt worries, a wider-than-expected US trade deficit and China's announcement of a rare trade deficit for February.

Economic tremors were felt elsewhere, with the currencies of a number of at-risk Asian countries weakening against the dollar.

Shares in German insurance groups such as Munich Re and Allianz plunged as such firms appeared set to take a hammering from the quake.

The falls came after steep losses on Thursday, when Shanghai lost 1.50 per cent, and on Wall Street, where the Dow, Nasdaq and S&P 500 indexes all ended down more than 1.8 per cent.

Markets were also nervous about the intensifying conflict in Libya and unrest in Opec oil linchpin Saudi Arabia.

Also hitting sentiment was the worsening European debt crisis and Chinese data that showed inflation hit 4.9 per cent in February, raising expectations of yet another rate hike. That prospect sent Chinese banking stocks tumbling.

"The recent West Asia unrest is spreading to Saudi Arabia, triggering fears in the financial markets across the globe," Kim Joong-Won, an analyst at HMC Investment Securities in Seoul, told Dow Jones Newswires.

In Beijing, central bank chief Zhou Xiaochuan said interest rates remained an important policy tool in fighting surging prices — following three rate hikes since October.

Alistair Thornton, an analyst at IHS Global Insight, commented: "We believe inflationary pressure will remain quite high over the next couple of months. More tightening measures are in the pipeline."

Oil prices were retreating even before Japan's quake due to Europe's debt troubles — amplified by a downgrade of Spain by ratings agency Moody's — and data showing that China experienced a rare trade deficit in February.

Both factors suggested the possibility of slower economic activity and thus smaller demand for oil.

Benchmark crude prices dipped below $102 in Asian trade after easing off two-year highs.

New York's main contract, light sweet crude for April delivery, fell 97 cents to $101.73 per barrel in the afternoon.

Brent North Sea crude for April dipped 39 cents to $115.04.

The yen steadied after taking a sharp fall immediately after Friday's quake, while the euro rebounded against the dollar having plunged after a Spanish ratings downgrade.

The yen fell to 83.30 to the dollar as dealers rushed away from the earthquake risk, but recovered in the late afternoon to 82.89 to the greenback, compared with 82.91 in New York late Thursday.

The euro fetched $1.3807, compared with $1.3794 in New York late Thursday. The single European unit gained to 114.47 yen from 114.31.

Gold ended at $1,415.00-$1,416.00 an ounce in Hong Kong, down from Thursday's close of $1,427.00-$1,428.00.

In other markets:

Seoul fell 1.31 percent, or 26.04 points, to 1,955.54 points.

Taipei fell 0.87 percent, or 75.08 points, to 8,567.82.

Taiwan Semiconductor Manufacturing Co fell 0.71 percent to Tw$70.0, while Hon Hai was 0.44 percent lower at Tw$113.0.

Manila fell 0.90 percent, or 35.59 points, to 3,924.35.

Aboitiz Equity Ventures fell 1.89 percent to 41.40 pesos, Aboitiz Power slipped 0.16 percent to 30.80 pesos, Metropolitan Bank dropped 0.48 percent to 62.85 pesos and Philippine Long Distance Telephone plunged 3.68 percent to 2,200 pesos.

Wellington fell 0.69 percent, or 23.39 points, to 3,382.84.

Insurance company and fund manager Tower fell 4.1 percent to NZ$1.86 after it announced its costs related to the Christchurch earthquake were expected to reach NZ$15 million-NZ$20 million ($11 million-$15 million). Retailer Warehouse rose 2.1 percent to NZ$3.45 after better-than-expected first half results.

Jakarta fell 1.25 percent, or 45.42 points, to 3,542.23.

Kuala Lumpur fell 1.40 percent, or 21.29 points, to 1,495.62.

Gaming group Genting was down 2.50 percent at 10.0 ringgit, Petronas Chemicals shed 2.40 percent to 6.56 and telecoms company Axiata fell 2.50 percent to 4.77.

Singapore fell 1.04 percent, or 31.95 points, to 3,043.49.

Oil-rig maker Keppel Corp dipped 1.02 percent to Sg$11.70, while Oversea-Chinese Banking Corp fell 0.96 percent to Sg$9.27.