The Nikkei stock average plunged to a fresh 17-year low Monday after Friday's tumble on Wall Street and a negative report on domestic machinery orders erased a rally sparked by a Finance Ministry comment out of Shanghai.

The 225-issue Nikkei plunged 321.10 points, or 3.05 percent, to close at an intraday low of 10,195.69, its lowest finish since Aug. 2, 1984, when it closed at 10,086.87.

The broader Tokyo Stock Price Index (Topix) of all first section issues plunged 24.85 points, or 2.30 percent, to 1,055.98, its lowest close since Jan. 12, 1999, when it finished at 1,055.93.

The sharp fall in the Topix dragged the total market value of stocks listed on the main section down to 296.7 trillion yen, its first dip below 300 trillion yen in 21/2 years.

The selling spree came on the heels of Friday's plunge on Wall Street, where a U.S. Labor Department report showed that the jobless rate had soared to 4.9 percent, its highest level in four years. The blue-chip Dow Jones Industrial Average fell 2.4 percent Friday to close at 9,605.85, while the tech-heavy Nasdaq composite index sank to a five-month low below 1,700.

"The U.S. market tumbled as investors renewed concerns over the U.S. economy, especially in consumption, which was believed to be strong until recently but will likely weaken due to the unexpectedly high jobless rate," said Eiji Kinouchi, chief technical analyst at Daiwa Securities SMBC Co.

The Nikkei staged a sharp rally in the early afternoon, reducing triple-digit losses incurred in the morning to a fall of around 60 points after Finance Minister Masajuro Shiokawa reportedly said in Shanghai that the government and the private sector should jointly create a new fund to shore up stock prices.

But the rally proved to be short-lived and gave way to fierce selling in the late afternoon when the government announced that core private-sector machinery orders fell 1.6 percent in July from the previous month. The announcement was taken as a fresh sign of Japan's worsening economy.

Asahi Bank, the volume leader, posted the steepest percentage fall on the main section, tumbling 31 yen, or 19.25 percent, to close at 130 yen. Daiwa Bank, the second in volume, fell 22 yen to 140 yen.

The two banks' shares dropped despite their announcement Friday that they are in talks on a proposal by Asahi to integrate their business operations under a holding company.

"The drop in the two bank's share prices reflect the market's cool response to the tieup," said Yuji Ono, a manager of the equity division at Nikko Securities Co.

The Nikkei hits its record high of 38,915.87 on Dec. 29, 1989.

Takenaka vows help

The government plans to devise a set of measures to bolster the sagging Tokyo stock market and implement them under an interim economic package to be unveiled late this month, said Heizo Takenaka, state minister in charge of economic and fiscal policy, on Monday

The planned package will include securities tax reforms and measures designed to promote job creation, labor-market deregulation, information technology and environmental conservation, Takenaka said in a speech in Tokyo.

Commenting on job-creation measures, Takenaka mentioned several ideas, such as new job-training programs, jobs at government entities, and temporary employment for environmental projects.

Takenaka said he supports Prime Minister Junichiro Koizumi's proposal to hire 50,000 people as teaching assistants at public schools.

The issue will be discussed at a meeting Tuesday of the Council on Economic and Fiscal Policy, a key government panel chaired by Koizumi, government officials said.

Based on results of the meeting Tuesday, Koizumi is expected to instruct his Cabinet ministers on Friday to work out the details, so that the government can devise the final package by the end of October, the officials said.