Japanese stocks slipped on Friday, weighed down by selling of exporters such as Canon Inc as the yen edged up against the dollar, with the Nikkei average closing down 0.6 percent.
Consumer lending firms such as Aiful Corp took a beating in the wake of Thursday's announcement by credit card company Mitsubishi UFJ Nicos that it would post a huge loss on restructuring charges and increased reserves for interest repayments.
But trade was limited on a slow news day, with investors loath to take out fresh positions ahead of a three-day weekend in Japan and before the release of U.S. data next week that will be keenly watched for clues on the health of the world's largest economy.
The fall in representative exporters like Canon and Honda is just a reflection of the yen's strength against the dollar and not really something to worry about, said Masayoshi Okamoto, head of dealing at Jujiya Securities.
What's happened is that the downside's been verified and now is holding solid around 16,000. What's limiting things is the continued absence of foreign investors, who haven't yet made up their minds about whether to buy or sell.
The market is waiting to see who will become Japan's next prime minister, but the fact that the race seems largely to have settled on lawmaker Yasuo Fukuda is expected to mute the reaction, with players instead waiting to see what his policies will be.
There is a sense of relief in the market that at least the new prime minister's government may be more stable than that of unpopular Prime Minister Shinzo Abe, who announced last week that he was resigning.
Otherwise, people are getting ready for next week's release of U.S. indicators such as consumer confidence and August existing home sales figures on Tuesday and second-quarter real GDP and August new home sales data on Thursday for hints on U.S. consumer sentiment and consumption.
People are basically just buying on dips and selling at highs to lock in profits. There's no sense of long-range trading going on at all, Okamoto said.
Trade was relatively thin, with 1.96 billion shares changing hands on the Tokyo stock exchange's first section compared with a daily average of 2.3 billion shares in August.
Decliners outnumbered advancers by more than two to one.
EXPORTERS SLIP, FINANCE FIRMS HIT The yen gained slightly against the dollar, trading around 114.76 yen in late Tokyo, and this hit exporters such as Canon -- which slipped 2.2 percent to 6,150 yen -- and Honda Motor Co Ltd, which was down by 3.1 percent at 3,750 yen.
Shares in Japanese consumer electronics makers Sharp Corp and Pioneer Corp both fell on investor doubts over the effects of their equity and business alliance announced on Thursday.
Sharp finished down 2 percent at 1,920 yen and Pioneer lost 2.21 percent to 1,370 yen.
The Mitsubishi UFJ Nicos announcement of a huge loss on Thursday sparked fears that other consumer lenders might have to hike reserves -- as media reports said Mitsubishi UFJ Nicos did against legal claims on overcharged interest -- and eat into profits, sending shares tumbling.
Aiful ended down 13.7 percent at 1,494 yen and Takefuji Corp plunged 13.8 percent to 2,000 yen. Acom Co Ltd slid 8.8 percent to 2,335 yen.
But such losses were countered by solid buying of steel shares ahead of expectations of good earnings results next month, with high metals prices supporting commodity-linked shares.
Sumitomo Metal Industries Ltd climbed 6.3 percent to 638 yen, JFE Holdings Inc was up 3 percent at 8,000 yen, and Nippon Steel Corp was up 2.1 percent at 822 yen.
After the market closed, Mizuho Financial Group Inc, Japan's second-largest bank, said it would cancel 214,900 of its own shares, equal to 1.9 percent of its total outstanding stock.
Also later on Friday, Japanese electronics maker NEC Corp. said it could not file a report or restate prior results to standards required by the U.S. Securities and Exchange Commission, increasing the chances its ADRs may be delisted from the NASDAQ.