The Nikkei average fell for a third straight session to hit a two-week closing low on Friday as renewed earnings concerns prompted selling in Tokyo Electron Ltd, Sony Corp and other high-tech stocks.
While trading remained sluggish with many institutional investors taking to the sidelines ahead of a long weekend in Japan, top banks and insurers also extended recent falls on concern about a slowdown in the Japanese economy.
Tokyo financial markets will be closed next Monday and Thursday for national holidays.
The Nikkei fell 0.51 percent or 56.87 points to 11,082.49, its lowest close since September 3, when it ended at 11,022.49.
The broader TOPIX index gave up 0.31 percent to 1,118.55, its lowest close since August 24.
In addition to pre-weekend position unwinding, some investors sold high-tech issues again amid growing caution about the tech sector's earnings outlook, Fujito said. The Nikkei topped 11,300 on Tuesday as investors were encouraged by a steady recovery in New York's tech-laden Nasdaq market from an August trough.
But data issued by a US trade group late on Thursday suggested that demand for semiconductor equipment was peaking, clouding the outlook for the Nasdaq and the global chip sector.
Growing signs of a slowdown in the Japanese economy and a continued take-over battle for UFJ Holdings among Japan's top banks to create the world's biggest bank by assets kept investors away from the banking sector, analysts said.
UFJ, the smallest and weakest of the country's top four banks, was down 1.77 percent at 444,000 yen. It has fallen almost 17 percent in a nine-day losing streak.
Decliners outnumbered advancers 835 to 590.
A total of 1.233 billion shares changed hands on the first section compared with Thursday's 1.212 billion, a two-week low.
Mitsubishi Tokyo Financial Group (MTFG), Japan's second-biggest bank, said after the market closed that it had completed a 700 billion yen ($6.4 billion) capital injection into UFJ, carrying out an agreement reached last week.
The injection followed an upgrade in the ratings of UFJ's banking units to BBB+ from BBB by credit rating agency Standard & Poor's.
UFJ is also being pursued by third-ranked Sumitomo Mitsui Financial Group (SMFG), whose unsolicited $30 billion offer has sparked an unprecedented take-over battle.
Neither the news of the hurried capital injection nor a punishment by the Japanese financial regulator against the local banking unit of Citigroup Inc of the United States were expected to inspire much appetite for bank shares.
Japan's Financial Services Agency late on Friday ordered the Japanese commercial banking unit of Citigroup to halt operations at four branches for one year from September 29 and cancelled their licenses, saying the unit had violated Japanese banking laws.
"What is happening is a correction of a temporary share price bubble in the sector due to the news-flows related to UFJ (since mid-July)," he said.
MTFG ended Friday down 0.11 percent at 950,000 yen, 17 percent below a year-to-date high marked soon after its take-over plan was reported in July. SMFG fell 2 percent to 636,000 yen.
Among tech issues, Tokyo Electron, the world's second-biggest chip equipment maker, was down 1.74 percent at 5,650 yen after hitting an 11-week closing high of 5,880 yen on Tuesday.
Hitachi Ltd, Japan's biggest electronics conglomerate, lost 1.16 percent to 679 yen.
Sony sank 1.56 percent to 3,780 yen after the company's president, Kunitake Ando, said on Thursday that he did not expect a sharp recovery in the profitability of its home electronics business in the crucial October-December quarter. Ando pointed to the high cost of developing flat-panel televisions and a shrinking market for home audio goods.
Japan's top insurance firm, Millea Holdings Inc, fell 0.7 percent to 1.41 million yen as concerns mounted over insurance payouts it may have to make after a series of typhoons and hurricanes that have hit Japan and the United States.
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