JAPANESE shares fell to new depths yesterday, marking a 17 month closing low and capping week of furious selling which analysts said was showing no sign of abating.

"It is beginning to look like a bottomless pit," one broker said. "Market participants are afraid to step in to buy and are retreating to watch the index fall lower and lower."

The key Nikkei average of 225 leading shares tumbled 770.22 points or 4.26 per cent to close at 17,303.65, the lowest close since August 1995.

Its March futures crashed 1,000 points to its maximum single day point loss possible, finishing at 17,150.

Friday's fall was the largest single day drop since the Nikkei average posted a loss of 1,054.72 points - or 5.6 per cent - on January 23rd 1995, when investors dumped Japanese shares on fears that the January 17th Kobe earthquake would take a heavy toll on the economy.

The drop took the Nikkei's cumulative losses for the first week of the new year to 2,057.7 points, or 10.6 per cent, sparking hopes that brokers that a rebound might ensue. But many brokers said the market environment was still riddled with too much uncertainty.

European and US markets remains largely unaffected by yesterday's slide in Tokyo but next week investment analysts will be anxiously watching trends on the Tokyo market to see if the slide can be arrested.

The decline in shares has been led by the banking industry, which is still trying to get out from under a virtual mountain of bad debts left over from the collapse of real estate values in the early 1990s.

The top 20 Japanese banks could see their unrealised stock profits wiped out if the key Nikkei average falls to around the 15,000 level, a report by Goldman Sachs (Japan) said.