Tokyo stocks tumbled more than three percent Thursday, leading an Asian rout, sparked by worries over emerging markets as the Federal Reserve further scaled back its stimulus programme.
The benchmark Nikkei-225 index slumped 3.25 percent, or 500.10 points, to 14,883.81 -- wiping out its 2.70 percent gains Wednesday.
There were also heavy losses for Hong Kong, which dived 1.35 percent and Sydney, which lost 0.89 percent.
The Fed said Wednesday it would reduce its monetary easing programme by $10 billion a month to $65 billion, following a similar move in December.
Investors took flight after the announcement, which stoked fears of a capital flight from emerging markets as dealers look for safer investments back home.
Sharp interest rate hikes by Turkey and South Africa on Wednesday failed to stem heavy losses in their currencies as developing economies around the world battle capital outflows.
Russia, Brazil and Argentina also faced further drops in their units, despite the International Monetary Fund stressing there was not a general panic and that each faces specific challenges.
Fed policymakers made no mention of the emerging market woes, leaving investors with little comfort, analysts said.
"The market was discouraged by the fact that they did not refer to emerging economies," said Hirokazu Kabeya, senior strategist at Daiwa Securities.
Investors are "wary that authorities may be a bit too optimistic... They could have said something like they would be 'watching the situation closely'," Kabeya added
"With that, the market atmosphere would be very different now."
Global equity and forex markets have been in turmoil since the end of last week after a plunge in the Argentine peso sparked fresh worries about developing economies.
The sell-off in Buenos Aires came on the back of data indicating manufacturing activity in China -- a key driver of global growth -- had contracted in January.
The Fed's stimulus has been widely credited with buoying global equity markets and the latest move, though widely expected, may do little to stoke optimism among jittery investors.
Wrapping up the final meeting of the Federal Open Market Committee under departing chairman Ben Bernanke, it noted that despite some mixed economic indicators since its December meeting, the US economy was improving overall.
However, US stocks slumped, The Dow dived 1.15 percent, the S&P 500 fell 1.01 percent and the Nasdaq shed 1.14 percent
In forex trade, the dollar was at 102.22 yen early Thursday compared with 102.25 yen in New York but well down from the 103.30 yen in Asia earlier Wednesday. The euro sat at 139.75 yen, compared with 139.71 yen in US trade but also well down from the 141.05 yen in Tokyo Wednesday.
The single currency was also at $1.3657 against $1.3662.