The Nikkei average fell almost 3 percent to a two-month closing low on Friday as risk aversion rose on growing sovereign debt problems in Europe, although Toyota shares managed to find a floor despite mounting recall woes. Mitsui & Co and other resource-linked shares took a beating after a key commodities index saw its biggest daily loss in almost six months on Thursday, hit by a 5 percent fall in crude oil and a steep fall in gold.
Toyota Motor Corp, whose recall troubles have weighed on the market in the last few weeks, rose to become one of the few gainers on the Nikkei after it put in a forecast-beating third quarter and raised its annual outlook. The share gain came despite news it was also is preparing to recall its iconic Prius hybrid car to address more than 100 complaints about delayed braking, spreading its quality woes to one of its most important models.
The benchmark Nikkei shed 2.9 percent to 10,057.09, a fall of 298.89 points, after earlier falling as low as 10,036.33. Analysts said support was likely around 9,900 - about where the Nikkei's 200-day moving average comes in. It lost 1.4 percent on the week.
After the bell, Panasonic Corp said its quarterly profit jumped more than threefold to the highest level in five quarters as it cut costs and enjoyed robust TV sales, and it lifted its outlook above market expectations. The broader Topix fell 2.1 percent to 891.78. Few investors were eager to buy ahead of US jobs data due out later on Friday and in the face of the uncertainties in Europe.
Worries over the ability of Greece, Portugal and Spain to pay their debts fuelled a flight from stocks to the safe-haven US dollar on Thursday, which hurt commodity prices denominated in the greenback. The S&P 500 Index dropped 3.1 percent. "Growing uncertainty in Europe is prompting investors to shrink their risk assets globally," said Yutaka Miura, a senior technical analyst at Mizuho Securities.
Toyota shares gained 1.1 percent to 3,315 yen. Nomura Securities analyst Shotaro Noguchi cut his target price on Toyota to 4,000 yen from 4,800 but reiterated his "buy" rating, saying that he expected substantial improvement in earnings even factoring in risk.
As of Thursday, shares in Toyota had lost as much as 23 percent, or $30 billion, in the two weeks since it announced a multi-million-vehicle recall for sticky accelerator pedals in North America, which has spread to most regions in the world. "The issues facing Toyota are not going to be solved that easily. What we're seeing today is a technical rebound because it was sold so much," said Yamagishi.
Hitachi Ltd advanced 3.3 percent to 315 yen after it exceeded market expectations by swinging to its first quarterly net profit in six quarters on cost cuts and a recovery in its power system operations. It also raised its forecast just below the market consensus. Sony Corp edged up 0.3 percent after it halved its annual loss forecast on a rebound in its flat-TV business and cost cuts.
But gains were limited to a handful of shares, with exporters broadly sold on worries about a stronger yen. The dollar recouped some ground against the yen, after earlier falling below 89 yen to its lowest since mid-December. Canon Inc shed 3.5 percent to 3,550 yen and Kyocera Corp lost 4 percent to 7,850 yen.
Honda Motor Co declined 3.7 percent to 3,100 yen. The 19-commodity Reuters-Jefferies CRB index - which counts US crude oil as its main component - closed down 2.6 percent after trading to its lowest levels since October 12. On a daily basis, the index's loss was the worst since August 14.
Mitsui & Co lost 4.6 percent to 1,291 yen, while fellow trader Mitsubishi Corp shed 3.3 percent to 2,118 yen. Some 2.3 billion shares were traded on the Tokyo stock exchange's first section, the heaviest this week but still off the seven-month highs above 3 billion marked in early January. Declining shares outnumbered advancing ones by more than 11 to 1.