Japan's Nikkei share average dipped near four-month lows on Friday, while the broader Topix was almost flat as investors held off buying on concerns North Korea could launch another missile test on its important national holiday over the weekend.
The Nikkei fell 0.4 per cent to 19,322.74, near Wednesday's four-month low of 19,254. The broader Topix was flat at 1,597.87.
Japanese shares have been dragged down by tensions over North Korea's nuclear and missile programmes, following its missile launch on August 29 and nuclear test on September 3.
The biggest talking point in the market was what North Korea will do on its national holiday on Saturday given it has tended to conduct missile tests on the country's important holidays.
North Korea had on Thursday pledged to take “powerful counter measures” to respond to US pressure or any new sanctions against it over its missile programme, accusing Washington of wanting war.
“Since we all know that North Korea has a holiday on Saturday, it's hard to buy stocks now. That's especially so for people like us, who manage funds for customers,” said an equity investment manager at a Japanese life insurance company.
Some were hopeful that the market's sentiment will improve after the weekend, barring shocking moves from Pyongyang.
“Most investors will be on the sidelines until September 9,” said Soichiro Monji, chief strategist at Daiwa SB Investments.
“But given that the US debt ceiling is already extended, I expect to see a rebound next week.”
GDP data
The market mostly shrugged off a revision in Japan's second quarter GDP figures.
The downgrade to an annualised rate of 2.5 per cent in April-June from an initial estimate of 4.0 per cent growth was widely expected after data used to revise GDP figures showed capital spending growth in April-June slowed from the previous quarter.
Food companies were the worst performers among sectors, falling 1.0 per cent. As they are considered to be defensive shares and have been bought as an alternative to low-yielding bonds, some investors may be selling them after the European Central Bank indicated that it could wind back its stimulus, said Tomoichiro Kubota, senior market analyst at Matsui Securities.
ECB stimulus programme
ECB President Mario Draghi signalled the central bank could make a decision on the future path of its stimulus in October even as he cautioned that the euro's strength was already weighing on inflation.
On the other hand, many exporters shares were firm despite the yen's strength. Transportation equipment index, comprised mainly of carmakers, rose 0.4 per cent. Toyota Motor rose 0.3 per cent, while car part maker Denso gained 1.8 per cent.