(Updates prices, adds details and analyst comments)

By Junko Fujita

TOKYO, April 4 (Reuters) - Japanese stocks sank on

Friday to their lowest levels since August, and were set for

their sharpest weekly drop in five years, as fears of a global

recession in the wake of U.S. President Donald Trump's sweeping

tariffs gripped markets.

As of 0230 GMT, the Nikkei index was down 2.6% at

33,818.18, and on course for a weekly decline of nearly 9%, if

losses hold.

The broader Topix fell 3.5% to 2,477.96, poised for

a weekly drop of 10%. Both indexes were set for their steepest

weekly losses since March 2020.

Wall Street benchmarks slumped on Thursday, ending with the

largest single-day percentage losses in years. S&P 500 companies

lost a combined $2.4 trillion in stock market value.

The brutal selloff came after Trump announced on Wednesday

Washington's steepest trade barriers in more than 100 years,

sending investors scrambling for safe-haven assets, including

the yen, which added further pressure on Japanese

stocks.

"Investors wanted to sell what they have as they turned

to a risk-off mode this week," Hiroyuki Ueno, chief strategist

at Sumitomo Mitsui Trust Asset Management.

All but five of the Tokyo Stock Exchange's 33 industry

sub-indexes dropped on Friday, with the banking index

down 10%, making it the worst performer. The banking index was

on track for a decline of more than 20% this week, its worst

weekly performance on record.

Japanese bank shares had gained popularity among

investors betting on rising Bank of Japan interest rates, but

the spectre of tariffs and their potential impact on economic

growth has stoked speculation that the central bank may need to

delay hikes.

Shares of Mitsubishi UFJ Financial Group ( MUFG ), one of

Japan's biggest banking groups, fell 10.3% and were set for

their biggest one-day drop since August 5.

BOJ Deputy Governor Shinichi Uchida said the central bank

will continue to raise interest rates if the likelihood of

achieving its 2% inflation target increases, while also closely

monitoring the risks posed by higher U.S. tariffs.

"Unlike yesterday's broad sell-off, today investors are

replacing their portfolios by selling exporters and buying

stocks with domestic demand," said Ueno.

Shares of Mitsui Fudosan ( MTSFF ) were up 5% while East

Japan Railway ( EJPRF ) advanced 3.8%.