The news spooked investors who were already nervous a day before China releases key data expected to confirm slowing growth in the world's second-biggest economy.
Tokyo fell 1.48 per cent, or 130.99 points, to end at 8,720.01, while Seoul closed down 2.24 per cent, or 41 points, at 1,785.39.
Hong Kong stocks closed 2.03 per cent, or 394.76 points, lower at 19,025.11, amid concern over the Chinese economy. But Shanghai ended up 0.46 per cent, or 10.11 points, at 2,185.49, on selective buying.
Sydney fell 0.70 per cent, or 28.5 points, to end at 4,068.0 after weak June jobs figures, which saw the unemployment rate rise to 5.2 per cent.
By cutting its key interest rate 25 basis points to 3.00 per cent, South Korea's central bank joined an international drive to ease the impact of the eurozone debt crisis that threatens export-dependent Asian economies.
The bank said in a statement the domestic economy was under pressure "due mostly to the increase in euro area risks and the sluggish economies of its major trading partners".
The reduction was the first since February 2009, when the key rate hit a record low of 2.00 per cent.
"The move was taken as a sign that the Korean economy is weakening." said Jackson Wong, an investment manager at Tanrich Securities.
The European Central Bank and China's central bank cut their rates last week, while Brazil on Wednesday slashed its rate to a record low.
But the Bank of Japan took no major new action despite lowering its growth forecast for the fiscal year, to 2.2 from 2.3 per cent, surprising some analysts.
Following a two-day policy meeting, the bank said it would keep rates steady at zero to 0.1 per cent and fine-tuned a 70 trillion yen (US$880 billion) asset-purchase programme but the size of the policy tool remained steady.
The bank said it would reduce the amount of fixed-rate loans it offers by five trillion yen and increase the purchase of treasury discount bills by the same amount, but observers said the move would have little impact.
Although expectations of major action by the bank had been waning in recent weeks, analysts were disappointed given the recent moves by other central banks.
"After rate cuts by Korea and Brazil, it's just odd that the BoJ is not playing ball like everyone else," said Hideyuki Ishiguro, strategist at Okasan Securities in Tokyo.
"Stock investors feel that the BoJ is too tentative, too little, and too late on policy, and that it lacks a sense of duty to support the market," he told Dow Jones Newswires.
Asian stocks slipped as soon as they opened, following a lead in the US after the minutes of the Federal Reserve's June meeting showed the rate-setting committee split on whether to provide more stimulus.
Several top policymakers urged the central bank to look at new tools to bolster the financial system amid a weak recovery, but the minutes also showed the Fed split on how, when and if to provide more stimulus.
The Dow Jones Industrial Average finished down 0.38 per cent.
The flood of news from the region overshadowed developments in the eurozone, where optimism about an austerity package in Spain was largely offset by worries that Italy may have to tap a eurozone rescue fund, dealers said.
On currency markets, the euro slipped against major currencies in early European trade to fresh two-year lows. It bought $1.2185 and 96.67 yen, from $1.2238 and 97.58 yen in New York late Wednesday.
The dollar weakened to 79.29 yen from 79.74 yen in New York.
Gold was worth $1,564.75 an ounce at 1125 GMT, compared with $1,578.20 late Tuesday.
In other markets:
Taipei fell 1.75 per cent, or 126.98 points, to 7,130.93.
Taiwan Semiconductor Manufacturing Co lost 3.07 per cent at Tw$75.7 while Hon Hai Precision slipped 3.11 per cent to Tw$87.1.
Wellington rose 0.65 per cent, or 22.56 points, to 3,501.40.
Telecom Corp. was up 2.2 per cent at NZ$2.58 after rival TelstraClear was sold to Vodafone, and market heavyweight Fletcher Building held steady on NZ$6.09.
Manila slipped 0.58 per cent, or 0.25 points, to 5,205.19.
Philippine Long Distance Telephone Co. shed 0.3 per cent to 2,698 pesos and conglomerate Ayala Corp. slid 4.3 per cent to 457.60 pesos.
Singapore closed down 0.58 per cent, or 17.27 points, at 2,972.04.
Wilmar International fell 1.94 per cent to Sg$3.53 and DBS Group shed 0.56 per cent to Sg$14.12.
Jakarta closed 0.87 per cent, or 35.01 points, lower at 3,984.12.
Coal miner Bukit Asam fell 3.6 per cent to 14,900 rupiah and tin miner Timah slid 3.4 per cent to 1,420 rupiah.
Kuala Lumpur slipped 0.24 per cent, or 3.96 points to finish at 1,625.49.
YTL Corp lost 3.1 per cent to 1.88 ringgit while Telekom Malaysia gained 1.2 per cent to 5.81 ringgit.
Bangkok fell 1.29 per cent, or 15.54 points, to 1,193.13
Banpu lost 1.30 per cent to 454.00 baht, while PTT closed 1.20 per cent lower at 329.00 baht.
Mumbai fell 1.47 per cent, or 256.59 points, to 17,232.55.
IT heavyweight Infosys slumped 8.15 per cent to 2,265.25 rupees while rival Wipro fell 3.98 per cent to 359.3.
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