The benchmark Nikkei 225 index was down 1.25 percent or 274.82 points at 21,761.23 in early trade, while the broader Topix index fell 1.36 percent or 22.41 points at 1,626.79.

Japanese shares were also weighed down by a stronger yen against the dollar, which traded at 112.69 yen in early Asian trade, against 112.78 yen in New York and 113.15 yen in Tokyo late Tuesday.

Tokyo stocks were seen "heavily sold following a dive in US shares... but the focus is on whether share prices will stop falling" during Wednesday's session, said Toshiyuki Kanayama, senior market analyst at Monex.

Wall Street stocks dropped sharply Tuesday as the yield curve -- the gap between the yields of long-term and short-term bonds -- narrowed, hinting at a slowing US economy.

"It's not just about the yield curve though," said Ray Attrill, strategist at National Australia Bank.

There are also "doubts about whether the Trump-Xi handshake and agreed 90-day moratorium on further tariff action was anything more than just that," he said, referring to the China-US summit that sent global shares skyrocketing on Monday.

In Tokyo, China-related shares were lower, with industrial robot maker Fanuc dropping 2.39 percent to 18,145 yen and electronic parts maker Rohm down 1.84 percent at 8,000 yen.

Banks were also lower, with Mitsubishi UFJ off 1.49 percent at 607.1 yen, Sumitomo Mitsui Financial down 0.43 percent at 4,087 yen and Mizuho Financial down 0.91 percent at 184.2 yen.

On Wall Street, the Dow ended down 3.1 percent at 25,027.07.