Japan's Nikkei stock average slipped on Friday as automakers slumped ahead of the end of the U.S. cash for clunkers program and prompted investors to sell broadly ahead of the start of Chinese stock trading.
Japan Airlines Corp <9205.T>, Asia's biggest carrier by revenue, rose 1.2 percent to 170 yen after the Nikkei business daily said it and shipper Nippon Yusen <9101.T> plan to integrate their air cargo businesses next April.
Analysts cautioned that a mixed bag of economic data, with positive U.S. manufacturing data from the Federal Reserve Bank of Philadelphia offsetting disappointment with the second straight rise in weekly jobless claims, was keeping investors skittish.
We're seeing a situation where stocks are rising in the midst of a still tough economic situation, said Kenichi Hirano, operating officer at Tachibana Securities.
Stocks are likely to keep on rising, but it will be with dips along the way, and substantial gains will take time.
The benchmark Nikkei <.N225> fell 0.6 percent or 59.44 points to 10,323.97 after rising 1.8 percent the day before, buoyed by a rebound in Shanghai shares <.SSEC>. The broader Topix lost 0.5 percent to 953.54.
Today's move isn't the start of anything significant. Investors are simply selling shares that rose yesterday amid a lack of other strong factors, and waiting to see about China. said Hiroaki Osakabe, a fund manager at Chibagin Asset Management.
Chinese shares on Thursday surged 4.5 percent, their second-biggest daily percentage gain of the year, after modest signs of official support helped trigger technical buying after a 20 percent dive in the two weeks to Wednesday's close.
Japanese investors are also awaiting results of an August 30 election amid newspaper predictions, including from the Nikkei business daily, that the opposition Democratic Party may be headed for a landslide victory, trouncing the conservative party that has ruled for most of the past half-century.
The market consensus is that the Democrats will win, and if they do it by a landslide this will do away with the current political paralysis, said Osakabe.
Having the Democrats win like this would be best for the stock market due to hopes for swift policy enactment, but the bond market of course is worried about the chance of more issuance to fund their campaign promises.
U.S. shares edged higher on Thursday after a survey by the Philadelphia Fed showed that factory activity in the U.S. mid-Atlantic region turned positive in August, breaking a 10-month run of contraction. But initial claims for unemployment insurance benefits rose 15,000. Economists polled by Reuters had forecast a drop.
The U.S. cash for clunkers rebate programme for customers trading in older, fuel-thirsty vehicles will end on Monday, the Transportation Department said on Thursday.
Honda Motor Co <7267.T> was the biggest drag on the Nikkei 225 by volume weight, sliding 2.8 percent to 2,995 yen. Toyota Motor Co <7203.T> lost 2.2 percent to 4,010 yen and Nissan Motor <7201.T> shed 3.9 percent to 687 yen. The transport subindex <.ITEQP.T> fell 2.2 percent, the biggest loser among the subindexes. Canon Inc <7751.T> lost 0.6 percent to 3,520 yen and Sony Corp <6758.T> slipped 0.8 percent to 2,460 yen.
(Reporting by Elaine Lies; Editing by Joseph Radford)