Japan's Nikkei average slipped 1.5 per cent on Thursday, dragged lower by TDK Corp after a newspaper reported the company would likely miss its profit forecast due to a stronger yen, while financials fell on worries about the outlook for bank profits.
Exporters such as Honda Motor Co Ltd lost ground on a firmer yen and concerns about a recession in the United States, a key destination for Asian exports.
On Wednesday a prominent analyst cut earnings forecasts for four big US banks and Deutsche Bank issued a profit warning, while European central bankers warned there was no end in sight to the global credit crunch.
"The fall in financial issues isn't stopping, due to more worries about earnings such as subprime-related appraisal losses. We can't really expect to see a fundamental recovery any time soon," said Yusuke Sakai, manager of equities trading at Mizuho Securities.
"The yen now seems to be comfortable around ¥100 against the dollar, and investors are fretting over next year's earnings outlooks for exporters, particularly automakers," he said.
Many auto and tech exporters have assumed a currency rate of ¥105 to the dollar in making profit forecasts for the business year ending this month.
As of 0052 GMT, the benchmark Nikkei average was down 195.72 points at 12,510.91, after gaining nearly 8 per cent in the last six days.
The broader TOPIX shed 1.3 per cent or 15.46 points to 1,222.09.
The dollar was trading around ¥98.79 after last week hitting a nearly 13-year low of ¥95.77.
Investors have been wary about the strength of the yen against the dollar as it makes Japanese goods less competitive in overseas markets and cuts into profits made abroad when brought back to Japan.
Shares of TDK tumbled 8.9 per cent to 5,820 yen after the Nikkei business daily said the electronic components maker is expected to fall short of its forecast and post a group operating profit of about ¥86 billion for the year ending this month, hit by a stronger yen and higher raw materials prices.
Among automakers, Honda Motor declined 2.9 per cent to 2,970 yen and Toyota Motor Co lost 2.9 per cent to ¥5,110.
Sony Corp shed 3.1 per cent to ¥4,100 and Kyocera Corp dropped 3.1 per cent to ¥8,590 yen.
Banks shares fell with Japan's top lender Mitsubishi UFJ Financial Group down 2 per cent at ¥878, while No. 2 Mizuho Financial Group gave up 2.8 per cent to ¥384,000 and Sumitomo Mitsui Financial Group, the third-biggest bank, slid 2.7 per cent to ¥692,000.
Separately, Sumitomo Mitsui said on Wednesday it aims to list its shares in New York in the next three years, as Japan's third-largest bank looks to expand its push overseas. (Reuters)
Nikkei slips 1.5%; TDK drags, financial worries weigh