Japan stocks dragged by US rescue package worries

The benchmark Nikkei 225 index lost 113.37 points, or 0.94 percent, to 11,893.16. The broader Topix index closed down 0.53 percent at 1,147.89.

Wary investors continued to unload shares in Tokyo as they awaited the fate of the U.S. government's $700 billion bank rescue plan. Relief at an apparent breakthrough midday Thursday gave way to concern later.

Washington Mutual Inc. was seized by the Federal Deposit Insurance Corp. in the largest failure ever of a U.S. bank, after which JPMorgan Chase & Co. Inc. came to its rescue by buying the thrift's banking assets.

Moreover, Republican ire over the size of the bailout package threatened to stall the Bush administration's efforts to ward off an economic meltdown.

But with a flood of Japanese companies set to release first-half earnings reports in October, investor focus is beginning to shift back to the business of scrutinizing revenues, profits and dividends.

"Japan along with the rest of the world was really at the mercy of U.S. events last week and this week," said Masayoshi Okamoto, equity strategist at Jujiya Securities in Tokyo. "But it's starting to look like Japanese markets may start moving more independently, based on how Japanese companies are actually doing."

Major decliners included marine transport issues, steel companies and trading houses. Mitsui & Co. shed 5.01 percent to 1,423 yen. Mitsui O.S.K. Lines plunged 6.34 percent to 946 yen as waning demand from China sent the Baltic Dry Index--a key measure of rates on 40 shipping routes--sharply lower the previous day.

Major exporters including auto makers and consumer electronics firms were mixed. Sony Corp. added 0.59 percent to 3,410, while Toshiba Corp. sank 3.19 percent to 486 yen.

Major banks closed on a positive note, with Mitsubishi UFJ Financial Group Inc. gaining 1.53 percent to 931 yen, and Mizuho Financial Group Inc. rising 1.08 percent to 468,000 yen.