In Japan, stocks dropped 5.56 percent, ending a week of moderate gains.
The news of the US Senate's rejection of the latest car industry bail-out also led to the highest drop in the dollar against the yen for 13 years, dealing a further blow to Japanese exporters.
The benchmark Nikkei 225 Stock Average was down 484.68 points, or 5.56 percent, at 8,235.87.
The broader Topix index of all first-section issues declined by 35.88 points, or 4.22 percent, to 813.37.
On currency markets at midday (0300 GMT), the dollar was quoted at 88.1 yen, sharply down from Thursday's 5 p.m. quote of 92.50-53 yen.
Hong Kong stocks fell almost 5.5 percent.
Hong Kong-listed Chinese shares led the declines, with losses approaching seven percent, spurred by disappointment over the lack of further stimulus measures from Beijing at a key annual economic conference that ended Wednesday.
The blue-chip Hang Seng Index closed down 855.51 points, or 5.48 percent, at 14,758.39. Turnover was 58.7 billion Hong Kong dollars ($7.57 billion).
Friday's declines took the index back below the 15,000-point-barrier it broke Monday when shares gained almost nine percent on expectations of rescue deals in the US and stimulus packages in China.
Shares in China's two stockmarkets plunged by nearly four percent.
The key Shanghai Composite Index, which tracks shares traded in local and foreign currencies, ended the day on 1,954.21, down 3.81 percent, or 77.47 points.
The smaller Shenzhen Composite also lost nearly four percent of its value, as the Shanghai Daily newspaper said investors were "taking profits due a gloomy economic outlook and fear of future losses".
Shanghai Daily played down the significance of the fall and said a rebound was expected soon.
"We think the fluctuation is normal and after more specific measures are announced in the future the index is likely to rebound," the newspaper quoted a research note by Donghai Securities as saying.
In Taiwan, the TAIEX index fell 174.30 points, or 3.74 percent, to close at 4,481.30.
