Japan's Nikkei tumbled after the government moved to delay a sales-tax hike for more than two years, bucking mostly higher markets around the region.
The closed 2.32 percent, or 393.18 points lower at 16,562.55, extending Wednesday's losses of 1.62 percent.
The Japanese yen strengthened against the dollar, trading at 109.1 at 1:18 p.m. HK/SIN time, compared with levels above 111 yen on Tuesday after Japan's Prime Minister Shinzo Abe announced a delay of the consumption tax hike until 2019 because of growing softness in the economy. A strong yen is generally a negative for Japanese stocks.
"This is not the first time for the consumption tax hike to be pushed back," DBS said in a note Thursday. "The second delay this time may have increased investors' concerns about economic uncertainties and skepticism about Abenomics," as Prime Minister Abe's economic reform program is called.
There are other concerns: "The postponement of the tax hike raises doubts over the sustainability of Japan's public debt," DBS noted. Japan's government debt exceeds 200 percent of its gross domestic product (GDP).
Analysts are also concerned that by lessening the chances of an economic slowdown, the move may put the kibosh on further Bank of Japan (BOJ) easing.
"Many are pointing to the fact that the proposed two-and-a-half year delay to the introduction of a 10 percent tax hike creates less of a need for further stimulus from the Bank of Japan at their mid-June meeting. But this had arguably already been priced into the currency over the past week," said Angus Nicholson, market analyst at IG, in a Thursday note.
"Global concerns around China may have also prompted renewed buying of the Japanese yen as a safe-haven asset," he added.
Chinese markets were higher, with the closed up 0.4 percent, or 11.563 points at 2,925.07, while the Shenzhen composite ended its session up 0.967 percent, or 18.236 at 1,904.742. In Hong Kong, the was 0.24 percent higher at 3:05 p.m. HK/SIN time.
Australia's S&P/ASX 200 closed 0.83 percent, or 44.271 points lower at 5,278.9, led by losses in its material and financial subindexes which were 0.97 percent and 1.16 percent lower respectively.
In South Korea, the Kospi closed up 0.12 percent, or 2.39 points at 1,985.11.
Japanese equities were down across the board, with even consumer-related stocks that might have benefited from the consumption tax hike delay, taking a tumble. Takashimaya was trading down 2.96 percent, and Fast Retailing was lower by 2.71 percent.
Australia's retail sales rose 0.2 percent in April from the previous month, compared with economists' expectations for a 0.3 percent increase, led by apparel and footwear retailing, food and beverage services and household goods, according to the Australian Bureau of Statistics.
U.S. crude had fallen below $48 on Wednesday after API data showed a surprise inventory build of 2.4 million barrels, while gasoline supplies fell 1.5 million barrels. The U.S. Energy Information Administration is due to release its inventory data on Thursday morning.
Reports that OPEC would discuss an output limit at its upcoming meeting in Vienna helped support prices.
Traders are likely to look ahead to the European Central Bank's monetary policy meeting on Frankfurt on Thursday and the U.S. ADP Employment report, which sets the stage for Friday's nonfarm payroll figures.
Major U.S. indexes closed marginally higher on Wednesday, with the effectively flat, the S&P 500 up 0.11 percent and the 0.08 percent higher. It was the Nasdaq's first six-day winning streak since February 2015.