While most of the region is closed for the Chinese New Year holiday, trading remained thin but dealers took their lead from New York and Europe where banking shares were battered.
The sell-off is the latest this year, which has seen trading screens from Asia to the Americas awash with red.
The latest round of blood-letting came on the back of worries about the financial sector as the global economy slows down, without the support of the Federal Reserve's easy monetary policies.
London, Paris and Frankfurt all finished down more than 2.5 percent, with the German DAX ending below 9,000 for the first time since October 2014. And Wall Street's three main indexes all lost more than one percent.
Financials were in focus as a slowdown in the world economy raises the prospect of loan defaults and lower interest rates, which eat into their bottom lines.
Banking stocks sagged in New York and Europe, with US titan Bank of America, Germany's Deutsche Bank and France's Societe Generale all tanking.
In Asian trade Tokyo slumped 5.3 percent in the afternoon, putting the market back into bear territory, a 20 percent fall from its recent highs.
Financial giant Mitsubishi UFJ plunging almost eight percent and rival Sumitomo Mitsui Financial Group tumbling 7.3 percent. Major brokerage Nomura tanked nearly 11 percent.
Exporters such as Toyota and Uniqlo operator Fast Retailing each down around five percent as they were hit by the strong yen.
The dollar sank to 114.50 yen, having sat above 120 yen just a week ago. The unit is considered a safe haven in times of uncertainty.
'Bucketload of concern'
The flight to safety also saw Japanese government bond yields dive below zero, extending a downtrend sparked by the Bank of Japan's surprise move last month to slap a negative interest rate on some commercial lenders' deposits.
And gold, another commodity considered low risk, climbed 1.5 percent Tuesday to $1,193.50.
Sydney shed 2.7 percent, Wellington was 1.4 percent off, Manila dived 1.5 percent and Jakarta was down 0.6 percent.
Shanghai, Hong Kong and Seoul, among others, were closed.
"Those off celebrating Lunar New Year will be happy their markets are closed," Chris Weston, chief markets strategist in Melbourne at IG Ltd., said in an email to clients.
"These markets need a strong shake up and sharp downside move, followed by a wave of buying to settle things down," he said, according to Bloomberg News.
"But until that comes there will be no clarity, absolutely no confidence and a bucketload of concern. It almost feels as though the markets are pushing central banks into some kind of action, but they don't know exactly what it is they want."
However, while regional equities were being scythed, crude prices staged a rebound after US benchmark West Texas Intermediate fell back below $30 a barrel on Monday.
WTI was up 1.4 percent at $30.10 and Brent added 0.7 percent to $33.12.
Both contracts lost more than 3.5 percent Monday after weekend talks between OPEC kingpin Saudi Arabia and Venezuela dashed hopes for a reduction in production, with Riyadh unwilling to move from its position.
Key figures around 0400 GMT
Tokyo - Nikkei 225: DOWN 5.3 percent at 16,107.26
Sydney - S&P/ASX 200: DOWN 2.9 percent at 4,829.30
Euro/dollar: UP at $1.1212 from $1.1193 on Monday
Dollar/yen: DOWN at 114.50 yen from 115.84 yen
New York - Dow: DOWN 1.1 percent at 16,027.05 (close)
London - FTSE 100: DOWN 2.7 percent at 5,689.36 points (close)
source: interaksyon.com