Traders also reacted to data showing Japan's economy contracted slower than expected in the third quarter, while Japan's current account unexpectedly turned to deficit in October.
The benchmark Nikkei 225 Index is down 247.14 points or 0.89 percent to 27,439.26, after hitting a low of 27,424.82 earlier. Japanese stocks closed significantly lower on Wednesday.
Market heavyweight SoftBank Group is gaining 1.5 percent, while Uniqlo operator Fast Retailing is losing almost 1 percent. Among automakers, Toyota and Honda are losing more than 1 percent each.
In the tech space, Screen Holdings is losing almost 1 percent, Tokyo Electron is declining more than 1 percent and Advantest is down 1.5 percent.
In the banking sector, Mitsubishi UFJ Financial is losing almost 2 percent, Sumitomo Mitsui Financial is declining 1.5 percent and Mizuho Financial is down almost 1 percent.
Among the major exporters, Mitsubishi Electric is losing almost 1 percent, Sony is declining almost 3 percent and Panasonic is down 1.5 percent, while Canon is edging up 0.2 percent.
Among the other major losers, Nidec, Orix, T&D Holdings, Minebea Mitsumi and Mitsui E&S Holdings are losing almost 3 percent each.
In economic news, Japan's gross domestic product contracted 0.8 percent on year in the third quarter of 2022, the Cabinet Office said on Thursday. That exceeded expectations for a decline of 1.1 percent following the 4.6 percent increase in the previous three months. On a seasonally adjusted quarterly basis, GDP fell 0.2 percent - again beating forecasts for a decline of 0.3 percent after climbing 1.1 percent in the three months prior.Conversely, there are no major gainers.
In the currency market, the U.S. dollar is trading in the higher 137 yen-range on Thursday.
On Wall Street, stocks turned in a relatively lackluster performance during trading on Wednesday after moving sharply lower to start the week. The major averages spent most of the day bouncing back and forth across the unchanged line.
The tech-heavy Nasdaq eventually ended the session down 56.34 points or 0.5 percent at 10,958.55. The S&P 500 also edged down 7.34 points or 0.2 percent to 3,933.92, closing lower for the fifth straight session, while the Dow inched up 1.58 points or less than a tenth of a percent to 33,597.92.
Meanwhile, the major European markets moved to the downside on the day. While the German DAX Index fell by 0.6 percent, the U.K.'s FTSE 100 Index and the French CAC 40 Index both dipped by 0.4 percent.
Crude oil prices fell sharply Wednesday, weighed down by data showing a sharp increase in gasoline inventories last week. West Texas Intermediate Crude futures for January ended lower by $2.24 or 3 percent at $72.01 a barrel, losing for the fourth consecutive session.