(Updates prices, adds comment and details)

By Junko Fujita and Ankur Banerjee

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

Friday to their lowest levels since last 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 0420 GMT, the Nikkei index was down 3.6%

at 33,474.56, and on course for a weekly decline of nearly 10%,

if losses hold.

The broader Topix fell 4.6% to 2,448.94, poised

for a weekly drop of 11%. Both indexes were set for their

steepest weekly losses since March 2020.

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.

The rout was led by banking stocks as the spectre of tariffs

and their potential impact on economic growth stoked speculation

that the Bank of Japan may need to delay rising interest rates.

Japanese bank shares recently gained popularity among

investors betting on rising BOJ interest rates.

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

sub-indexes dropped on Friday, with the banking index

down 11%, making it the worst performer and triggering a circuit

breaker.

The banking index was on track for a decline of more than

20% this week, its worst weekly performance on record. Shares of

Mitsubishi UFJ Financial Group ( MUFG ), one of Japan's biggest

banking groups, fell 11.6% and were set for their biggest

one-day drop since August 5.

"Banks in Japan are caught in the crossfire of waning

rate-hike expectations coinciding with the market coming to

terms with increased chances of a global recession," said Jon

Withaar, who manages an Asia special situations hedge fund at

Pictet Asset Management.

BOJ Governor Kazuo Ueda said that the central bank will

scrutinise the impact of U.S. tariffs on the country's economy

when setting monetary policy, warning the higher levies will

likely weigh on global and domestic economic growth.

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.

Takamasa Ikeda, senior portfolio manager at GCI Asset

Management, said the Nikkei has "double headwind - the tariff

and the stronger yen" and could fall to as low as 32,000 this

month.