Markets were also tracking developments in Afghanistan, with the deteriorating situation in the capital Kabul having eclipsed overnight strength on Wall Street
The figures ramped up expectations the Fed, in a bid to prevent overheating, will start reducing its colossal bond-buying programme earlier than it had thought
The figures gave investors reason to think ahead of Friday's government employment report, which some analysts had forecast to show a gain of as much as a million jobs
The Nikkei share average fell 2.24% to 27,488.25 by 0215 GMT, falling below the 28,000 mark for the first time since June 21. The broader Topix dropped 1.92% to 1,883.38
Telecom operator Vodafone Idea fell as much as 14.6% after the company's March-quarter loss widened and revenue fell, compared with the previous quarter
Shares of Chinese restaurant chain Totenko rallied 6.41 percent at 1,245 yen after Ueno Zoo near one of its outlets announced a giant panda had delivered twins.
New energy vehicle companies, leading healthcare firms and liquor stocks, long seen as bets with frothy valuations, witnessed sharp corrections in the past few days.