Tokyo - Tokyo stocks lost 0.34 percent on Friday after a scare over a Portuguese bank sent Wall Street lower and boosted the yen, denting exporter shares.
The Nikkei 225 index fell 52.43 points to finish at 15,164.04, while the Topix index of all first-section issues was down 0.32 percent, or 4.06 points, at 1,255.19.
“Investors have gone more 'risk-off' in light of how fully valued many global stock markets have become and how vulnerable they are to potential sell-offs,” said Hiroichi Nishi, general manager of equities at SMBC Nikko Securities.
Despite the downturn, the Nikkei's losses narrowed by late morning as buying from pension funds helped support the market and “softened the falls”, said Norihiro Fujito, senior investment strategist at Mitsubishi UFJ Morgan Stanley Securities.
The yen - seen as a safe bet during times of uncertainty or turmoil - gained strength as the Portuguese bank scare spread.
The Japanese currency was at 101.29 to the dollar, up from 101.53 on Thursday.
A stronger yen dents the profitability of Japanese exporters and tends to weigh on their shares.
US and European shares sank Thursday after it emerged that the parent of Banco Espirito Santo (BES) had covered up a $1.8 billion hole in its accounts and failed to make payments on some short-term debt.
All three main indexes in New York ended lower, while London, Frankfurt and Paris also saw hefty losses as the news brought back memories of the eurozone sovereign and banking debt crisis of 2011.
Shares in Lisbon dived more than four percent.
In Tokyo, car giant Toyota finished down 0.36 percent at 5,981 yen after the leading Nikkei business daily said it and Germany's BMW planned to develop a common platform for a pair of sports cars, as part of a tie-up signed last year.
Other automakers were also lower with Honda losing 1.62 percent to 3,515 yen while Nissan lost 0.20 percent to 971 yen.
Copier and camera maker Canon jumped 2.36 percent to 3,338 yen after a Nikkei report that it would post robust April-June earnings.
(Dow Jones Newswires contributed to this article) - Sapa-AFP