The benchmark Nikkei 225 index fell 1.77 percent, or 464.92 points, to end at 25,748.72, while the broader Topix index gave up 1.19 percent, or 21.97 points, to 1,829.18.
The dollar fetched 129.64 yen, against 130.00 yen in New York on Wednesday.
Broad selloffs followed losses in US shares, which soured on heightened fears of even faster tightening by the Federal Reserve as inflation haunts the global economy.
Market players continued to focus on the latest US inflation data showing that consumer prices rose at an annual pace of 8.3 percent, higher than forecast but slowing slightly from the previous month due to a drop in energy costs.
On Wall Street, the tech-rich Nasdaq index closed down 3.1 percent while the Dow fell 1.0 percent.
“Investors took cues from the Nasdaq’s sharp fall, and sell orders spread across a broad range of shares, particularly growth stocks,” Okasan Online Securities said.
After hitting the intra-day low in early trade, the Nikkei index trimmed losses thanks to bargain-hunting, although not enough to end above water.
SoftBank Group tumbled 8.02 percent to 4,491 yen. After the market closed, the investment giant reported a record annual net loss of $13 billion after a bruising year that saw its assets hit by a US tech rout and a regulatory crackdown in China.
Toyota fell 1.53 percent to 2,050 yen a day after announcing a record full-year net profit while issuing cautious forecasts.
Uniqlo operator Fast Retailing plunged 4.59 percent to 56,290 yen. Tokyo Electron, which makes tools to build semiconductors, fell 1.67 percent to 54,000 yen.
Toshiba edged up 0.84 percent to 5,367 yen as reports said US investor KKR has approached Blackstone to prepare a joint bid for the Japanese engineering company.