Nikkei 225 index fell more than 4% before closing down 2.7% at 17,240.95. Earlier, the index had fallen below the key resistance level of 17,000 for the first time since September.
US shares had fallen over 2% as a oil stockpiles report and a Federal Reserve survey suggested more sluggish growth.
Weak economic data from Japan also dented investors’ confidence.
Government data showed that core machinery orders fell 14.4% in November from the previous month.
The orders were down for the first time in three months in the world’s third largest economy.
Brent crude prices, meanwhile, fell 0.9% to $30.05 a barrel after earlier hitting a fresh 12-year low of $29.73.
In Australia, S&P/ASX 200 share index ended 1.6% lower at 4,909.40, despite the release of better than expected employment data.
The unemployment rate in the country was 5.8% in December, with fewer jobs lost than economists were expecting.
Australia lost 1,000 new jobs, as against expectations of 10,000.
In South Korea, the benchmark Kospi index closed down 0.9% at 1,900.01 after its central bank kept interest rates unchanged for the seventh consecutive month.
Hong Kong’s Hang Seng index was 0.5% lower at 19,830.64 in afternoon trade.
China’s Shanghai Composite index was the only bright spot in the region – rising 0.6% to 2,967.35 – as it reversed earlier losses.
Regulators had announced late on January 13 that they had stepped up monitoring share-selling by listed companies’ major shareholders.
The securities commission also said that its transition to a US-style registration system for listings would be a gradual process and not lead to a surge in initial public offerings (IPOs).
The announcement was the latest in a series of measures to support the market after heavy losses since last week.
Elsewhere in the region, Indonesia’s Jakarta composite index was down 1.7% at 4,459.32 after multiple bomb blasts rocked the capital city.
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