Japanese stocks rebounded mildly on Friday, following its biggest one-day decline since 1987, as exporters rose on the back of the weaker yen and as defensive stocks rose.

The Nikkei 225 closed for the lunch break 1.5 per cent higher at 8,588.11, while the broader Topix was 2.4 per cent higher at 885.17.

The yen weakened against the dollar overnight and was recently trading at Y101.65, compared with yesterday when it stayed close to Y100 in Asian trading. Crude oil futures gained 4.5 per cent to $72.99 per barrel.

Astellas Pharma led the Nikkei higher with a 7.6 per cent gain to Y3,810. Canon gained 4 per cent to Y3,130 and Sony was trading 2.8 per cent higher at Y2,385. Nintendo bucked the trend with a 5.3 per cent decline to Y33,300.

Korean stocks continued their descent with a 1.9 per cent decline to 1,190.59, hitting a new three-year low as banking shares declined. Shinhan Financial dropped 9.6 per cent to Won33,400 and KB Financial fell 8.1 per cent to Won39,900.

In Hong Kong, the Hang Seng opened lower, with a 0.7 per cent decline to 15,129.56, while the sub index of mainland Chinese companies dropped 0.1 per cent to 7,354.71.

Shares in Shanghai managed to eke out a 0.1 per cent gain to 1,912.112, while in Singapore shares were 0.4 per cent higher at 1,959.21.

The S&P 500 closed 4.3 per cent higher after a late rally, having spent most of the session in negative territory. Futures were trading 0.8 per cent higher at 948.60.

There were banks earnings to digest in the US, with Merrill Lynch reporting a worse-than-expected loss mainly on writedowns and credit losses. Citigroup also reported a net loss, mainly due to weakness in the US economy and declining performance in the bank's credit card division.

Merrill's chairman and chief executive John Thain said he was beginning to see a "significant contraction" in US economic activity, which was likely to affect growth globally.

Banking stocks were mixed across the Asia-Pacific region, with Australian banks trading lower, while Japanese banks managed to claw back some of yesterday's losses.