The Nikkei average fell 0.8 percent on Friday as Tokyo Electron Ltd slid on concerns that weak commodity DRAM prices could hurt orders, while caution ahead of key US jobs data prompted investors to sell stocks.
Banks such as Mizuho Financial Group fell after the European Central Bank and Bank of England held interest rates steady on Thursday, sparking expectations that the Bank of Japan may follow suit this month, meaning banks' profits won't benefit from higher interest rates in the near term.
Ahead of US non-farm payrolls figures due out later Friday, which will be closely watched for clues on US economic health, investors bet on defensive stocks or sold shares to square positions. "Whether the US Federal Reserve will lower interest rates depends on the impact of the subprime situation on the economy," said Kenji Kobata, a managing director in the research department at Ace Securities Co Ltd "But so far, none of the economic indicators suggest the Fed should do it. Investors are wavering."
The Nikkei dropped 134.84 points, or 0.8 percent, to end at 16,122.16. The broader TOPIX index shed 0.7 percent, or 11.50 points, to 1,557.02. On the week, the benchmark Nikkei lost 2.7 percent. The Nikkei has rebounded 5.6 percent since August 17 when Asian stocks were hit by growing fears of a global credit squeeze, but some other Asian stocks have posted stronger recoveries in the same period. The Shanghai Composite Index has risen 13 percent.
Foreign investors appear to have cut their weighting on Japanese stocks, and the Tokyo market will likely struggle to advance, said Shozui Kobayashi, assistant fund manager at United Investments Co Ltd. "Domestic demand remains weak and Japan still relies on exports, especially on China's strong demand," he said. "But investors think it's better for them to invest directly in China." Trade volume remained subdued with 1.6 billion shares changing hands, compared with a daily average volume of 2.3 billion shares in August.
Decliners beat advancers 933 to 668. Tokyo Electron lost 2.6 percent to 7,940 yen on concerns that weak commodity DRAM prices would hurt orders from its major client Samsung Electronics Co Ltd. Other chip-related stocks were also under pressure as Elpida Memory Inc slipped 0.5 percent to 4,130 yen and Advantest Corp, the world's largest maker of microchip testers, shed 3.1 percent to 4,120 yen.
The dollar dipped 0.2 percent from late US trade to 115.05 yen which also weighed on technology exporters. Mizuho Financial declined 3.4 percent to 678,000 yen and Sumitomo Mitsui Financial Group gave up 3 percent to 846,000 yen. In the steel sector, Nippon Steel Corp slipped 3.1 percent to 789 yen, giving up its 1.8 percent gain from the previous session as the company kept its annual pretax profit forecast unchanged despite market expectations for a hike.