Stocks Tumble After BOJ Decision

Japan's benchmark Nikkei shed as much as 1.5 percent on Tuesday after the Bank of Japan (BOJ) disappointed investors by failing to address recent market volatility in its monetary policy statement.

A sell-off also hit many emerging markets across Asia as investors bailed on emerging markets, with Thailand's SET Index dropping 5 percent and Indonesia's Jakarta Composite closing down 3.5 percent.

Elsewhere, South Korea's Kospi hit a fresh seven-week low and Australia's S&P ASX 200 was the session's sole gainer, rebounding 0.4 percent from its previous four-and-a-half-month low.

(Read More: Is the Best Trade of 2013 Now Over?)

BOJ in Focus

Analysts widely expected no action from Japan's central bank but many were hoping for additional steps to ease recent market turbulence. The disappointment was reflected in the yen, which strengthened to the 98 handle per dollar from its previous level of 98.9.

"The BOJ is sending the message that at the end of the day it's a central bank and will not pander to the markets too much," said Vishnu Varathan, market economist at Mizuho Corporate Bank.

Nikkei Accelerates Losses

Tokyo Electric Power was the worst performer on Japan's benchmark index, with losses of 5.5 percent. Metal stocks also suffered with a 5 percent drop each in Kobe Steel and Toho Zinc.

(Read More: Nikkei Bull Run Over: Chartist)

Interest rate-sensitive stocks like real estate developers also lost ground after the BOJ held off on extending its fixed-rate loan durations. Sumitomo Realty & Development and Tokyo Tatemono lost 5 percent each.

Most blue-chip exporter stocks were lower after the yen paused it's pace of declines. Sharp and Canon fell 3 percent each.

Speaking to CNBC about the Japanese economy, Robert Zoellick, former World Bank president and Distinguished Visiting Fellow at the Peterson Institute for International Economics said that the recent optimism "could be a sugar high unless the Japanese government really invests in the third arrow, the structural reforms."

(Read More: Major Structural Reforms in Japan Unlikely: Mr Yen)

Sydney Sole Gainer

Australian financial markets bucked regional weakness as traders played catch-up with global markets following a long weekend holiday. Still, gains were capped as as investors digested China's weak trade data over the weekend, which revealed slowing demand for Australian commodities.

Resource stocks were higher with Gindalbie Metals leading gains by 18 percent while metals miner Panoramic Resources rose 5.6 percent.

(Read More: The Dreaded R Word Catches Up With This Economy)

Contractor NRW Holdings eased 6.5 percent after cutting its full-year revenue profit forecasts.

Kospi Falls 0.6%

The yen's sharp drop against the greenback weighed on South Korean exporter stocks with market heavyweight Samsung Electronics tumbling 2.5 percent. Any weakness in Japan's currency makes local exporters less competitive against its Japanese rivals.

Financial markets in China are shut until Thursday for a public holiday.

— By CNBC.com's Nyshka Chandran. Follow her on Twitter @NyshkaCNBC