Government to use up to $250bn to buy shares in ailing financial institutions.
Japan’s benchmark index has lost more than 23 per cent this month.
Hong Kong share prices closed 4.8 per cent lower while share prices in South Korea, Singapore, Taiwan and New Zealand were also sharply lower.
Europe’s main stock markets fell heavily at the start of trading, with London and Frankfurt down five per cent.
Gulf stock markets also fell at the start of trading on Thursday, led by the Dubai Financial Market, which dived more than six per cent.
The declines followed another dismal day on Wall Street, with US stocks suffering their worst day since the 1987 stock market crash amid fears that a global recession may not be preventable.
The Dow Jones industrial average closed eight per cent down, or 733 points to 8,577 on Wednesday, despite reports of strong profits from large companies such as Coca-Cola and Intel.
Investors’ mood soured after a government report showed that sales at US retailers last month fell by the biggest monthly drop in more than three years.
The news shook the markets as consumer spending accounts for two-thirds of US economic activity.
John Terret, Al Jazeera’s correspondent in New York, said there were concerns that the bailout of banks would not work, that banks still would not lend and there were worries of a US and global recession.
The head of San Francisco’s branch of the US Federal Reserve on Tuesday said that the US economy “appears to be in recession”.
“The recent flow of economic data suggests that the economy was weaker than expected in the third quarter, probably showing essentially no growth at all,” Janet Yellen said.
“Growth in the fourth quarter appears to be weaker yet, with an outright contraction quite likely,” she said. “Indeed, the US economy appears to be in a recession.”
Recession is broadly defined in the United States as more than two quarters of decline in real gross domestic product.
“All the good news has now come out,” Masatoshi Sato, a broker at Japan’s Mizuho Investors Securities, said, referring to the bailouts and rescues. “Attention has now shifted to the real economy.”
A handful of countries, including New Zealand, Ireland and Singapore have already confirmed that they are in a recession, while Japan and Germany, the world’s second and third-biggest economies, have said they were on the brink of a downturn.
Al Jazeera’s Alan Fisher, reporting from Brussels where an EU summit has taken place, said that European leaders are calling for a radical overhaul of the world’s financial institutions.
“There is a belief here that a 21st century approach to how the global economy is handled must be adopted,” he said.
“Leaders also want a strategy to implement a long-term outlook that they say would predict possible economic downturns.”