The headline Nikkei-225 index at the Tokyo Stock Exchange was down 127.18 points at 9,942.35.
Worries have increased as political leaders and bankers in the Greek debt talks remained unable to agree on how to avert an outright default by Athens, sending down European and US shares.
Analysts also fear that the Greek problem might spread to larger economies, such as the heavily indebted Italy and Spain.
Europe's problems also weighed on the Tokyo bourse, Hiroichi Nishi, general manager at SMBC Nikko Securities , told Dow Jones Newswires.
"Combined with a sense of overheating in the overall market (following the recent gains), there are increasing concerns that European debt problems are expanding into Italy and Spain," he said.
The worry about Europe clouded US markets, already hit by the uncertain outlook of the US economy.
The Dow Jones Industrial Average closed Monday down 151.44 points (1.20 per cent) to 12,505.76.
The broader S&P 500 shed 24.31 points (1.81 per cent) to 1,319.49, while the tech-heavy Nasdaq Composite dropped 57.19 points (2.00 per cent) to 2,802.62.
Nishi said the yen's continued strength, particularly against the euro, also weighed on the market.
The euro stood at $1.4035 and 112.45 yen in early Tokyo trade, little changed from $1.4029 and 112.51 yen in New York on Monday.
The dollar traded at 80.28 yen, compared with 80.24 in New York.
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