Japan's Nikkei average fell 0.3 percent to hit its lowest close in five weeks on Friday, with investors' reluctance to buy ahead of key US jobs data outweighing short-covering on better-than-expected US sales figures. Daiwa Securities Group dropped 6.1 percent and Sumitomo Mitsui Financial Group fell 2.1 percent after news that Daiwa plans to buy SMFG's stake in their investment banking joint venture.
Dainippon Sumitomo Pharma Co tumbled 6.1 percent, erasing gains made on Thursday after it said planned to buy US drugmaker Sepracor Inc and as analysts expressed reservations about the bid. In moderate trade, the benchmark Nikkei fell 27.53 points to 10,187.11, its lowest finish since July 30. It shed 3.3 percent on the week, though it has gained about 15 percent so far this year.
Activity was subdued ahead of the US employment data later on Friday and a long weekend in the United States. The broader Topix declined 0.8 percent to 935.74. Wall Street gained after US August retail sales data beat expectations and eased concerns about the economy, complemented by a survey showing improvement in the services sector.
US non-farm payrolls are forecast to have fallen by 225,000 in August, after dropping 247,000 in July. The unemployment rate is seen edging up to 9.5 percent from 9.4 percent. A US labour market report on Wednesday showed more private-sector job losses in August than forecast.
"We currently have both bullish investors who have been encouraged by the improvement in economic data and corporate earnings and those who think the momentum lacks strength and are doubtful whether things will further improve going forward," said Soichiro Monji, chief strategist at Daiwa SB Investments.
Japan's parliament is to vote in the Democrats' leader Yukio Hatoyama as prime minister on September 16 after their landslide victory in Sunday's election. The Nikkei broke below its 25-day moving average this week, but analysts said they see support around 10,150, roughly the level of its August low.
Should this break, the next support is at 10,000, which is both a key psychological barrier and just above where the Nikkei's 75-day moving average comes in, as well as the bottom of the Nikkei's Ichimoku cloud on charts, said Hiroaki Osakabe, a fund manager at Chibagin Asset Management.
"Should we break this level, sentiment in the market could turn poor," he said. Toshiba Corp shed 2.3 percent to 466 yen after industry sources said the company plans to bid for French nuclear group Areva's power distribution and transmission equipment unit in a deal that could cost it more than 500 billion yen ($5.4 billion).
Daiwa Securities dropped to 508 yen and SMFG was down at 3,770 yen after sources said the two are in talks to end their joint venture Daiwa Securities SMBC. "Daiwa has been depending on Sumitomo Mitsui a lot to win mandates for various businesses, and now it is going to lose that tie. Daiwa SMBC played a key role for Daiwa Securities Group," said Wataru Kasatani, a financial analyst for MDAM Asset Management in Tokyo.
Shares of Dainippon Sumitomo Pharma tumbled 6.1 percent to 963 yen. Tobishima Corp and other construction firms tumbled, extending steep losses posted after the Democratic Party won national elections on Sunday to defeat the long-ruling Liberal Democratic Party (LDP), market analysts said.
The Democrats want to eliminate wasteful spending, while the LDP has long used public works projects to pump-prime the economy. Tobishima sank 8.8 percent to 31 yen, while fellow construction firm Kumagai Gumi shed 5.3 percent to 72 yen and Daisue Construction lost 6.8 percent to 41 yen.
But shares of exporters such as electronics parts maker Kyocera Corp rose after better-than-expected US retail sales data lifted Wall Street. Kyocera climbed 2.2 percent to 7,970 yen and Honda Motor Co advanced 1.6 percent to 2,885 yen. Some 1.9 billion shares changed hands on the Tokyo exchange's first section, in line with last week's daily average. Declining stocks outnumbered advancing ones by more than 3 to 1.