Japan's Nikkei share average tumbled 5 per cent to hit a near four-month low on Tuesday morning after Wall Street posted its worst decline in four years on fears about rising US bond yields and potentially rising inflation.

The Nikkei was trading down 5.3 per cent at 21,490.63 in midmorning trade, the lowest level since October 20.

The S&P 500 and Dow Industrials indices slumped more than 4 per cent overnight, as the Dow notched its biggest ever intraday drop, down nearly 1,600-points.

The declines for the Dow and the benchmark S&P 500 index were the biggest single-day percentage drops since August 2011.

The rout reverberated through the Japanese market, which hit a 26-year peak last month, buoyed by last year's re-election of Prime Minister Shinzo Abe, firm global growth and strong earnings expectations by local companies.

“Investors are now unwinding their risk positions,” said Takuya Takahashi, strategist at Daiwa Securities. “People are pulling out of risk assets now and at this point we don't know if this is temporary or not.”

Takahashi added that the Nikkei's immediate support is seen at its 200-day moving average of 20,938.

All of the Topix's 33 subsectors were in the red, with insurance and exporter stocks, such as machinery and electric component makers, among the worst hit.

Insurer T&D Holdings stumbled 7 per cent and Dai-ichi Life Holdings nosedived 7.4 per cent.

Furukawa Electric declined 6.2 per cent, Yokogawa Electric dropped 6.3 percent and Sumitomo Electric Industries fell 6.2 per cent.

Bellwether companies also lost ground. Toyota MotorCorp shed 3.7 per cent, Honda Motor Co fell 4.4 per cent, Sony Corp slipped 4.2 per cent and Nintendo Co tumbled 5.2 percent.

Market participants expect that the Bank of Japan will buy exchange-traded funds on Tuesday to support the market. The BOJ had bought 73.1 billion yen ($672 million) of ETFs on Monday. The broader Topix dropped 4.6 per cent to 1,740.32.

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