The Nikkei fell 1.2 per cent to threaten major chart support around 14,203, a break of which could trigger a retreat to 14,000. The sales tax rises to 8 per cent from 5 per cent on April 1, which is also the start of the new financial year in Japan.
Following its usual inverse relationship with stocks, the yen briefly pushed to the highest in a week against the US dollar at 101.71.
Talk of possible stimulus in China had been supporting Asian stocks in recent sessions, but the effect was starting to fade given the lack of any concrete steps.This was never on cards any way it was nothing but wishful thinking on the part of the investors.
The Australian market shed 0.9 per cent while MSCI's broadest index of Asia-Pacific shares outside Japan eased 0.2 per cent. Stocks in South Korea, Taiwan and Singapore all managed minor gains.
Wall Street's slipped on the news that the United States and the European Union had agreed to work together to prepare possible tougher economic sanctions in response to Russia's behavior in Ukraine.
The Dow ended down 0.60 per cent, while the S&P 500 fell 0.70 per cent. Nasdaq Composite Index lost 1.43 per cent to a low.
The US losses were led by technology stocks, with Facebook off almost 7 per cent a day after announcing a $2 billion takeover of Oculus VR Inc, a maker of virtual-reality glasses for gaming.
Shares in Citigroup Inc fell after hours when the Federal Reserve rejected its plans to buy back $6.4 billion of stock and boost its dividends, citing deficiencies in the bank's ability to plan for stressful situations.
Others blocked by the Fed in their plans for higher dividends or share buy backs included the US units of HSBC, RBS and Santander.
In debt markets, the talk was all about Wednesday's auction of new US five-year notes that drew such stellar demand from investors that it left dealers with the lowest share of an offer on record.
That drove five-year yields down a sharp 7 basis points to 1.74 per cent, unwinding some of the rise seen since Federal Reserve Chair Janet Yellen last week spooked markets with talk of rate hikes next year.
Yields in Europe have been falling even more as policymakers there hint at radical stimulus measures. Some of the European Central Bank's most conservative policymakers have said the bank could adopt more unconventional measures to tackle a surging euro and ward off deflation.
As a result the premium that US two-year notes offer over German debt hit a 15-month high on Wednesday, making the euro relatively less attractive against the dollar.
The Euro slipped to $1.3783, well off the week's peak of $1.3875. The biggest loss came against the Australian dollar where the euro sank 0.9 percent to a four-month trough at A$1.4910.
The US dollar was a little lower against a basket of major currencies at 79.999.
In precious metals trading, spot gold was subdued at $1,304.96 an ounce after hitting a 5-week low of $1,298.29 on Wednesday.
US crude oil was holding at $100.18 a barrel having gained a dollar on Wednesday as inventories at the future's delivery point dropped for the eighth straight week.
Brent for May delivery was down by 19 cents at $106.84 a barrel.