The 225-issue Nikkei Stock Average lost 437.68 points, or 1.58 percent, from Tuesday to close the day at 27,350.3.
The broader Topix index, meanwhile, fell 26.21 points, or 1.34 percent, to finish at 1,922.91.
Trading got off to a downbeat start, local dealers said, following hawkish comments made Tuesday by Federal Reserve Governor Lael Brainard which sparked fears over the impact of the Fed's monetary tightening.
"Investors fear that the U.S. economy will slow substantially because of the Fed policy. It can also impact the Japanese economy as exporters will perform better when the global economy is growing," Norihiro Fujito, senior investment strategist at Mitsubishi UFJ Morgan Stanley Securities Co., was quoted as saying.
From a more immediate perspective, Takatoshi Itoshima, a strategist at Pictet Asset Management, said "Brainard's remarks hit investor sentiment, and the overnight decline in Nasdaq prompted a sell-off in technology stocks today."
"But overall, the Japanese market is relatively cheap, so I expect some demand for buying stocks at a decline," Itoshima said.
Other brokers said market players were also keenly eyeing the minutes of the U.S. central bank's monetary policy meeting in March set to be released later in the day to gauge the Fed's stance.
By the close of play, declining issues outnumbered advancing ones by 1,545 to 259 on the Prime Market, while 35 ended the day unchanged, and electric appliance, marine transportation and transportation equipment issues led decliners.
High-tech issues followed their U.S. counterparts lower overnight, with Advantest dropping 3.0 percent, while Tokyo Electron fell 3.6 percent by the close.
Nikkei heavyweight SoftBank Group weighed on the broader market, losing 2.8 percent.
Oil refiners and related issues found favor on rising prices, however, with Cosmo Energy Holdings soaring 13.4 percent, while Idemitsu Kosan gained 1.7 percent.
Eneos Holdings, however, relinquished earlier losses to end down 0.2 percent.
On the Prime Market on Wednesday, 1,174.86 million shares changed hands, rising from Tuesday's volume of 1,155.44 million shares.
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