The Japan and South Korea markets closed in negative territory amid the regional selloff.
The Nikkei 225 benchmark ended 347 points, or 1.8 percent, lower at 18,883, and the Topix closed down 22 points, or 1.4 percent, at 1,527 despite a better-than-expected quarterly Tankan Survey, a broad measure of business sentiment, released by the Bank of Japan before the market open.
The headline index for big manufacturers' sentiment was at plus 12 points in December, unchanged from the previous quarter. For large non-manufacturers, sentiment was up 2 points to plus 25 for the same period.
Izumi Devalier, an economist at HSBC Global Research, said in a note the report shows the mood, despite a better-than-expected reading, remains fragile. "The three-month-ahead outlook index for manufacturing surprised on the downside, falling to +7 from +10 in September. Sentiment has turned particularly cautious in iron & steel, where a global supply glut has eroded pricing power."
"We are also concerned about the deterioration in the outlook among motor vehicle manufacturers, given the industry's importance for Japan's economy," Devalier added.
Exporter stocks, such as Toyota, Honda and Sony, were all down, falling between 0.82 and 2.9 percent. Heavyweights such as Fast Retailing and Fanuc were down 3.09 and 2.79 percent respectively.
In Korea, the Seoul Kospi closed 21 points, or 1.07 percent, lower at 1,928.
Blue chip stocks fell, with Samsung Electronics closing down 1.79 percent, steel manufacturer Posco falling 3.24 percent, and KB Financial Group shedding 1.01 percent.
Shares in Hyundai Motor and Kia Motors finished up 1.35 and 2.68 percent respectively, after local media Yonhap reported the two firms are aiming for higher auto sales in 2016.