 Markets remain jittery |
The Nikkei ended up 0.3% at 14,888.77 points - having earlier touched a 16-month low - as the yen weakened slightly against the dollar.
On Wall Street the Dow Jones index slumped by more than 200 points.
There will be no fresh direction from Wall Street on Thursday, with all US markets closed for Thanksgiving.
The falls came a day after the US Federal Reserve cut its growth forecast - stoking fears of a slowdown.
The central bank now sees the US economy growing by between 1.8% and 2.5% in 2008, compared to its previous forecast of between 2.5% to 2.75%.
The dollar, weakened by the changed growth forecast, ticked slightly higher on Thursday, with one dollar now buying 108.855 yen.
"I think there is a brief relief among investors," said Yoshinori Nagano, chief strategist at Daiwa Asset Management.
Financial jitters
In the US the worries saw the Dow Jones index plummeting 211.1 points or 1.6% to 12,799.0 while the Nasdaq fell 1.3% or 34.7 points to 2,562.2.
"We just can't seem to break free of the financial concerns that are out there," said Bucky Hellwig, of Alabama-based Morgan Asset Management
"The unwinding of the real estate and the mortgage market continues to weigh on investor concerns."
Falling share prices boosted demand for government bonds, seen as a safe haven in troubled times.
Dollar pressure
The continuing dollar and share weakness has been sparked by the US mortgage debt crisis, which has led to a growing number of American banks revealing multi-million dollar losses.
US Treasury Secretary Henry Paulson told the Wall Street Journal that the number of potential home loan defaults "will be significantly bigger" in 2008 than in 2007.
Some analysts now expect the Federal Reserve to cut US interest rates further when it meets in December in an effort to ease problems in both the housing and credit markets.
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