A man looks at his watch as he passes an electronic board displaying a graph of currency rates outside a brokerage in Tokyo.

Tokyo - Tokyo stocks closed 1.01 percent lower on Friday as the crash of a Malaysia Airlines plane in rebel-held eastern Ukraine sent jitters through the market, with shares of major Japanese carriers falling.

The Nikkei 225 index slipped 154.55 points to finish at 15,215.71 while the Topix index of all first-section issues ended down 0.79 percent, or 10.09 points, at 1,263.29.

MH17 was carrying 298 people from Amsterdam to Kuala Lumpur when it crashed, with US officials saying it was shot down.

The plane was lost in eastern Ukraine where government forces are engaged in a fierce battle to quell a rebellion by pro-Russian insurgents.

The Nikkei's losses were triggered by the crash, said Hirokazu Kabeya, senior strategist at Daiwa Securities.

He added that business was also hit by soft buying sentiment ahead of a three-day weekend in Japan.

“We still don't know details of the incident but (market players) need to shun risks,” Kabeya said.

“Tensions had been simmering but they came to the fore again... (Investors) can't be so bold to push ahead with buying at the moment.”

On Wall Street the Dow fell 0.94 percent from Wednesday's record close, while the S&P 500 sank 1.18 percent and the Nasdaq was down 1.41 percent.

Geopolitical concerns were exacerbated by Israel's launch of ground operations in the Gaza Strip.

However, “the Russia-Ukraine situation and the Gaza invasion aren't likely to negatively affect the (global) economy,” Hideyuki Ishiguro, senior investment strategist at Okasan Securities, told Dow Jones Newswires.

Japan's two biggest airlines closed with modest losses.

All Nippon Airways (ANA) fell 0.80 percent to 246 yen while Japan Airlines (JAL) was 0.66 percent lower at 5,940 yen.

Both carriers said they do not operate flights over Ukrainian airspace.

Embattled electronics maker Sharp fell 2.13 percent to 321 yen after the Mainichi newspaper said it would report a net loss in the April-June quarter owing to one-time losses linked to the restructuring of its European solar power business.

Fujitsu rose 1.82 percent to 782 yen after the leading Nikkei business daily reported it planned to withdraw from semiconductor manufacturing.

The yen, considered a safe haven in times of turmoil, was a touch lower against the dollar but still up from Thursday's levels.

The dollar was buying 101.32 yen in Tokyo afternoon trade, against 101.17 yen in New York but still down from 101.51 yen earlier Thursday in Tokyo. - Sapa-AFP