Japan's Nikkei share average edged down 0.12 percent on Thursday, extending losses into a third straight session as record-high oil prices above $61 a barrel hit transportation and rubber stocks on profit concerns. Some technology shares including Canon Inc got a boost from a fall in the yen to near an 11-month low against the dollar, but trade overall remained subdued ahead of Japanese machinery orders and US jobs data on Friday.
"High oil prices had a psychological impact" on the market, said Shigeharu Shiraishi, managing director at Societe Generale Asset Management. However, he added that the impact of costlier oil on Japan's overall economy should be limited.
Kirby Daley, a strategist at Societe Generale Securities' Fimat division in Tokyo, agreed.
"This has been very psychological because we haven't seen any quantitative proof that the higher oil price is hurting the bottom line of companies," Daley said.
"Until I see companies reporting lower-than-expected earnings because of unexpectedly high oil, I'm not selling the market on that," he added.
The Nikkei closed down 13.39 points at 11,590.14.
The broader TOPIX index ended down 0.29 percent at 1,180.22.
US crude oil futures hit an all-time high of $61.63 a barrel in ACCESS electronic trading on Thursday.
The rise in oil prices took its toll on marine and air transportation companies, whose fuel costs account for more than 10 percent of their sales.
Shares of Nippon Yusen KK, Japan's biggest sea freight firm, lost 0.8 percent to 625 yen, while Kawasaki Kisen Kaisha Ltd, ranked third, fell 0.8 percent to 630 yen. Japan Airlines sagged 0.7 percent to 297.
Rubber stocks also were sold, with tyre maker Bridgestone Corp down 0.9 percent at 2,110 yen.
Energy stocks enjoyed hefty gains. Gas and oil project developer Inpex Corp rose 3.8 percent to 677,000 yen.
Investors punished chip maker NEC Electronics Corp for issuing a loss warning for the latest quarter on sapping sales of multi-purpose microcontrollers and mobile phone chips.
The stock plunged 10.1 percent to 4,450 yen after being untraded for most of the day due to a glut of sell orders.
In a research note, UBS lowered its rating on the world's No 8 chip maker to "reduce 2" from "neutral 2" and cut its target price to 4,100 yen from 5,200 yen.
NEC Corp, which owns 65 percent of NEC Electronics, sank 3.5 percent to 583 yen.
Analysts said NEC Electronics' dim outlook left a negative impression about the overall technology industry, with many companies having already projected lower profits for the April-June quarter.
Trade volume decreased for the second straight session, with 1.28 billion shares changing hands, well below last year's daily average of 1.45 billion.
Decliners outpaced advancers 1,024 to 489.
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