The Nikkei booked its lowest close in more than a month on Friday, slipping 0.53 percent after Japanese machinery orders data came in weaker than expected and heightened concern about the outlook for the world's second-largest economy.
Investors punished machinery companies such as Komatsu Ltd, Kubota Corp and Komori Corp, while major exporters such as Honda Motor Corp fell to profit-taking.
The data showed that core private-sector machinery orders fell 7.4 percent in September from the previous month on a seasonally adjusted basis, below economists' forecasts for a rise of 1.9 percent. The highly volatile data is seen as a key measure of capital spending for the coming six to nine months.
"It's a quite sharp fall and raises strong concerns over Japan's economic outlook," said Yasukazu Shimizu, senior market economist at Mizuho Securities. The Nikkei finished down 86.14 points at 16,112.43, its lowest close since October 4. It had been up about 0.30 percent immediately before the release of the machinery data an hour before the close.
It posted its second straight weekly loss, declining 1.45 percent this week. The broader TOPIX index was down 0.48 percent at 1,581.37. Komatsu, Japan's largest manufacturer of construction machinery, fell 1.4 percent to 2,090 yen while.
Kubota, a maker of farm equipment, slid 3.6 percent at 952 yen, extending losses from the early afternoon. Komori, a manufacturer of offset printing machines, fell 3.5 percent to 2,080 yen. Fanuc Ltd, a maker of industrial robots, declined 0.4 percent to 10,450 yen.
Concern about the strength of the world's second-largest economy was prompting investor caution, especially among foreign investors, said Koichi Ogawa, chief portfolio manager at Daiwa SB Investments. Overseas investors are regarded as a critical component of the Tokyo market, and their movements are closely watched by participants here.
"We've got GDP data coming next week and everyone is pretty much expecting those numbers to be somewhat weak," Ogawa said. Shares of Japan's large lenders fell, mirroring concerns about the domestic economy. Third-ranked Sumitomo Mitsui Financial Group Inc dropped 1.6 percent to 1.20 million yen. Larger rival Mizuho Financial Group Inc dropped 1.2 percent to 853,000 yen.
Shares of Honda Motor fell 1.6 percent to 4,230 yen, after gaining more than 4 percent in the previous five sessions. Shares of Toyota Motor Corp declined 1.8 percent to 7,140 yen, dropping further away from a record high hit earlier this week.
Shares of drug makers such as Daiichi Sankyo Co Ltd declined due to concern about further regulation of the US health-care industry following the Democrats' election victory. Daiichi Sankyo, Japan's second-largest drug maker, fell 5.5 percent to 3,240 yen.
But Mitsumi Electric Co gained 9.6 percent to 1,837 yen, becoming the third-biggest positive contributor to the Nikkei 225 stock average, after the electronics parts maker lifted its annual net profit forecast by 78 percent due to cost cuts. Mitsui Chemicals Inc rose 3.8 percent to 803 yen after it reported a 43.5 percent rise in first-half group operating profit and lifted its outlook for the full year to March to above market expectations. Trade activity rose to its highest in two months, with 1.91 billion shares changing hands on the Tokyo exchange's first section. Decliners beat advancers by a ratio of more than two to one.
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