By Agence France-Presse
The benchmark Nikkei 225 index lost 4.16 percent or 943.70 points to 21,738.38 in early trade while the broader Topix index was down 3.94 percent or 71.94 points at 1,751.80.
"Investors fled to sell after the large drops on Friday and Monday" on Wall Street, said Toshihiko Matsuno, analyst at SMBC Nikko Securities.
"The gains since the turn of the year were rapid and the sudden downturn came as a shock" to market players, he told AFP.
As Wall Street continued its record-setting advances, Tokyo's Nikkei had also hit 26-year highs on the recovering global economy and robust corporate earnings.
Markets were now entering "a correction phase," he said. "It's natural that we see a correction though the pace is a bit too fast."
Wall Street stocks plunged in chaotic trading Monday, as the Dow's gains for 2018 were erased in a brutal pullback from months of stock market euphoria that had been acclaimed by President Donald Trump.
The Dow Jones Industrial Average saw its steepest ever one-day point drop on inflation fears, wiping 4.6 percent off the value of America's 30 largest companies to finish at 24,345.75, having at one point plummeted nearly 1,600 points to a low of 23,923.88.
The Japanese currency, which often draws safe-haven buying in times of uncertainty, held firm after jumping on Monday, darkening the outlook for Japanese exporters.
The dollar was trading at 109.10 yen against 109.13 yen in New York, sharply lower than rates around 110 yen seen a day earlier.
A strong yen hits Japanese exporters as it makes their products less competitive abroad and erodes profits when repatriated.
Toyota, which is to announce earnings later Tuesday, was down 3.14 percent at 7,265 yen while Canon fell 3.15 percent to 4,112 yen.
Sony lost 4.0 percent to 5,345 yen and Nintendo plunged 4.60 percent to 44,750 yen.