The Nikkei plunged to a 15-month low as investors took fright over the pace of US monetary tightening, with a slump triggered by the Dow's fall Wednesday to its lowest level of 2018.
Oil prices meanwhile dived to fresh 15-month lows, prolonging volatility that has gripped the crude market in recent weeks.
In Europe around 1100 GMT, London's benchmark FTSE 100 index was down 0.5 percent, with losses capped by stronger-than-expected UK retail sales data and as traders looked ahead to the outcome of the Bank of England's regular monetary policy meeting Thursday.
In the euro zone, Frankfurt's DAX 30 shed 1.0 percent and the Paris CAC 40 slumped 1.5 percent.The euro hit a six-week high at $1.1480.
On the corporate front, shares in Airbus dived 8.3 percent to 80 euros after French daily newspaper Le Monde said the European aircraft maker could face fines of several billion dollars under a US corruption probe.
The Federal Reserve on Wednesday raised US interest rates for the fourth time this year as expected -- but markets reacted badly after chairman Jerome Powell said the bank would not shift course on reducing its balance sheet.
Investors had hoped for a less aggressive approach amid concern that global growth is slowing, while Powell played down the impact of recent market turmoil on the US economy.
Markets "think the Fed has completely misjudged the situation and now it's just a matter of trying to find an exit while you can", said Kyle Rodda, analyst at IG Group in MelbReuters
"We're probably entering a stage now where markets have got it (in) their head that we're preparing for quite sustained downside going into 2019."
The Fed now predicts two interest rate increases next year, down from three, as it trimmed its forecast for US growth and inflation.
"The market overreacted to the Fed, I think," said Shane Oliver, head of investment strategy at AMP Capital Investors.
"It is moving in a dovish direction and is on track for a pause in the first half of next year. Markets are being driven by fear rather than fundamentals."
But the spill over from the rate hike continued to rattle investors Thursday, deepening concern over global growth prospects which are already facing headwinds from Trump's trade war with Beijing, a slowing Chinese economy, and potential turmoil from Britain quitting the European Union.
Japanese stocks declined also after the Bank of Japan left ultra low rates unchanged, with the threat of trade protectionism and slowing global growth casting a pall over the export-driven economy.
A strong yen also put downward pressure on stocks, with the dollar falling below 112 yen.
Oil prices meanwhile tumbled Thursday, with Brent striking $54.64 per barrel, the lowest level since September 2017.
Crude reversed strong gains won a day earlier on concerns about growth and oversupplies of US oil, and tracking equity losses.
A smaller than expected fall in US crude stockpiles added to supply glut fears triggered earlier this week by forecasts of increasing shale oil production.