Shares in Japan dropped 6.4 per cent on Tuesday to lead a decline across an influential group of economists declared that the US was in recession and oil dropped to a 3½-year low, the global economy was decelerating more sharply than expected earlier. Hong Kong shares lost 5 per cent and the Australian market, which is dominated by energy and resource companies, was down by more than 4 per cent.

The Reserve Bank of Australia cut the cost of borrowing for the fourth time in four months, lowering it by one percentage point to a six-year low of 4.25 per cent. The Bank of Japan left its overnight lending rate at its record low of 0.3 per cent.