Japanese stocks ended in negative territory on Wednesday after the shock resignation of Prime Minister Shinzo Abe, with the Nikkei average down 0.5 percent as thin trade and political uncertainty took their toll.
The afternoon's see-saw trade, which saw the Nikkei touch both its high and low for the day as the news about Abe emerged, reflected the mixed nature of the event, traders said.
Abe has lost binding political energy, and with rumours in the market that a snap election might be near, a lot of negative factors have been eliminated, said Hiroyuki Fukunaga, chief strategist in the research division at Rakuten Securities.
But until the next prime minister is named, political uncertainty will weigh on the market.
Shares elsewhere in Asia rose on the back of strong energy stocks after U.S. crude hit a record closing high the previous day and expectations that the U.S. Federal Reserve will lower its benchmark interest rate next week.
MSCI's measure of Asia Pacific stocks excluding Japan was up 0.4 percent at 0819 GMT, with political uncertainty the main culprit for Japan's underperformance.
Traders said the impact of Abe's resignation was likely to be limited, with the market relieved that the threat of political gridlock was removed but a bit wary of buying until the overall situation becomes somewhat more clear.
There was concern about what might happen in parliament under Abe, whether he could get policies enacted, said Yumi Nishimura, manager at the investment advisory section of Daiwa Securities SMBC.
But because we can't see who the new prime minister will be, it's hard to read the situation clearly.
The Nikkei average ended down by 80.07 points at 15,797.60, while the broader TOPIX index was down 0.27 percent at 1,528.27.
Trade was thin with 1.7 billion shares changed hands, compared with a daily average volume of 2.3 billion shares in August. Decliners beat advancers by 965 to 639.
Abe is expected to stay on in a caretaker role until a new prime minister is chosen. Taro Aso, a close Abe ally who is secretary-general of Abe's ruling Liberal Democratic Party, is generally seen as a front runner.
Having the unpopular Abe leave is a relief to the market, but this will not have as much of an impact as if a person directly connected with economic policy were to quit, like the Bank of Japan head, said Takahiko Murai, general manager of equities at Nozomi Securities.
If Aso takes over, that will mainly be in line with expectations, minimising the impact.
Banking shares slid, with Sumitomo Mitsui Financial Group down 3 percent at 818,000 yen and Mizuho Financial Group down by 2.4 percent, both underperforming the banking sub-index, which slid by 1.7 percent.
Silicon wafer firm Sumco closed down by 11.2 percent, at 4,910 yen, after Daiwa Institute of Research downgraded its rating on the silicon wafer.
Another loser was Toto Ltd, Japan's largest toilet maker, which ended down 3.6 percent at 880 yen after the company said one of its bidet-equipped toilets caught fire at a hospital in southern Japan. Media reports said nobody was injured.
Real estate stocks such as Mitsubishi Estate bucked the trend by powering higher for the second straight day, spurred by a sense that the sector had been oversold in previous sessions and that Japan's central bank won't raise rates at its policy meeting next week.
Mitsubishi Estate was up by 2.3 percent at 2,875 yen, Mitsui Fudosan up 2.3 percent at 2,700 yen, and Sumitomo Realty and Development up 1.8 percent at 3,350 yen.
Shares in Mandarake Inc, a second-hand bookstore chain specialising in comic books, surged by their daily limit of 13 percent to 436,000 yen on speculation that Aso -- known for his fondness for comics -- will become the next prime minister.