TOKYO Japan's Nikkei fell a four-week closing low on Friday, led by exporter shares, as a looming U.S. fiscal crisis threatened to tip the world's largest economy into recession and as uncertainty over a Greek bailout rekindled worries about the euro zone.
Exporters, which already face slowing demand for their products due to sluggish global growth, would suffer further hardship should the U.S. fall into recession on the back of the 'fiscal cliff'.
Some $600 billion worth of spending cuts and tax hikes would take effect in the new year if U.S. President Barack Obama and Congress failed to agree a deal.
These concerns weighed on the dollar against the yen, which traded at 79.55 yen to the greenback, not far from Thursday's high of 79.32, a double-whammy to exporters.
Among the exporters that headed lower were construction machinery maker Komatsu Ltd, camera and printer maker Canon Inc(7751.T), camera maker Nikon Corp and automaker Suzuki Motor Corp, down between 0.8 and 2 percent.
The Nikkei ended 0.9 percent lower at 8,757.60, falling for the fifth straight session, and was down 3.2 percent this week, its worst weekly performance in four weeks. But the benchmark is still up 3.6 percent this year.
The U.S. fiscal issue "is a major concern for investors and the market may fall further next week when Congress reconvenes on November 13," said Eiji Kinouchi, chief technical analyst at Daiwa Securities.
He said Japan's stock market could face further pressure and volatility next week as U.S. markets are likely to fall as some companies go ex-dividend, adding that investors should watch U.S. stocks with high dividend yields.
The re-emergence of macro-economic concerns, including the uncertainty whether Greece will get more international aid and weak German exports data, comes amid a weak quarterly earnings season that has seen 60 percent of the 134 Nikkei companies that have reported so far undershoot market expectations.
That compared with 54 percent in the previous quarter, according to Thomson Reuters StarMine.
Software maker Trend Micro Inc dropped 4.5 percent on expectations that its fourth-quarter earnings would remain weak after it posted a 17.2 percent year-on-year decline in third-quarter operating profit.
The broader Topix index lost 0.6 percent to 730.74 in light trade, with 1.17 billion shares changing hands, down from Thursday's 1.57 billion and last week's average of 1.8 billion.
NEXON, SUMITOMO RUBBER PUNISHED
Many companies have cut their earnings outlooks. Among them were online game provider Nexon Co Ltd (3659.T), Sumitomo Rubber Industries Ltd (5110.T) and consumer credit firm Credit Saison Co Ltd.
Nexon slid 16.4 percent to a record closing low, Sumitomo Rubber sank 6.7 percent and Credit Saison lost 2.5 percent.
"Investors were overly optimistic that they had thought that the market would price in the U.S. election result and would buy Japanese stocks whose valuations are cheap," said Masatoshi Sato, a senior strategist at Mizuho Investors Securities.
"It's too early to price in all the negative factors. The market may not pick up unless the index hits bottom around the psychological support level of 8,500."
The Topix index carries a 12-month forward price-to-earnings ratio of 11.3, cheaper than the U.S. S&P 500's 13 but slightly more expensive than the pan-European STOXX Europe 600's 11, data from Thomson Reuters Datastream showed.
Nippon Telegraph and Telephone Corp climbed 4.2 percent after the fixed-line operator unveiled its midterm management plan, even though it had also cut its operating profit forecast for the business year.
A Tokyo-based analyst who declined to be named said investors had to dig deep to find the companies that are still performing well.
"It's not easy time but there are companies doing relatively better ... It's stock-picker central," he said.
Among them was mobile games developer Gungho Online Entertainment Inc, which reported a 150 percent year-on-year increase in operating profit for the nine months ended September. The stock jumped 12.7 percent on Friday, and has surged nearly 170 percent so far this year.
(Additional reporting by Ayai Tomisawa; Editing by Chris Gallagher)