Japan's Nikkei 225 Stock Average fell Friday as lack of indications of more monetary stimulus in the U.S. by the Federal Reserve undermined the interest rate cut by China.
The Nikkei fell 1.96 percent or 169.37 points to 8470.35 and the Topix index declined 1.2 percent to 722.94. Among the major losers were Sony Corp (3.6 percent), Sharp (3.6 percent), Tokyo Electron Ltd (2.6 percent) and Toshiba Corp (2 percent).
Market sentiment turned negative after Fed Chairman Ben Bernanke refused to commit to monetary easing in his congressional testimony Thursday on the economic outlook. Given the big negative response in financial markets to the mounting euro zone debt crisis and the deterioration in the U.S. labor market conditions, investors were looking for signs of more monetary stimulus by the Fed.
Meanwhile, Bernanke's congressional testimony left the door open for more policy action, particularly if financial stresses escalate. On a positive note for the jobs market in the U.S., the jobless claims in the week ended June 2 fell to 377,000.
The People's Bank of China cut Thursday the benchmark interest rate by 25 basis points, which was the first rate cut since 2008, sending out a strong signal that policymakers were going all out to shore up the country's economy. In addition, banks will now be allowed to offer loans at a 20 percent discount to the benchmark lending rate. However, these measures were not able to revive the confidence of market players.
Also dragging down the market were investor concerns on the Greek exit from the euro zone, which, if it happens, could significantly disrupt global financial markets. The rising borrowing costs of Spain and its troubled banking system have also affected the investor confidence.