HONG KONG - Asian markets were mixed Thursday following big gains in the previous session and as dealers grow nervous that US leaders have still not agreed a deal to avert the fiscal cliff.
The yen clawed back some of its losses seen in recent days, but eyes are on a Japanese central bank meeting that ends later in the day, with expectations high that it will unveil another round of monetary easing.
Tokyo eased 0.85 percent after surging to an eight-month high on Wednesday, while Hong Kong fell 0.13 percent and Shanghai lost 0.37 percent, but Sydney was up 0.27 percent.
Seoul was 0.10 percent higher, with the election of conservative Park Geun-hye seeming to have little effect.
With less than two weeks to go before the fiscal cliff of huge tax hikes and deep spending cuts is due to take effect, US lawmakers have still not reached a compromise budget deal to cut the nation's deficit with less painful measures.
President Barack Obama said Wednesday he and the Republicans had narrowed differences to "a few hundred million dollars". But a deal remains elusive.
Republicans are loath to raise taxes, while Democrats do not want to cut spending on programmes such as Medicare.
House Speaker John Boehner, the Republican negotiating with the president, has said he is willing to extend tax breaks for everyone earning less than US$1 million (S$1.22 million) per year. Obama has said, however, he is willing to go no higher than $400,000.
Boehner announced Wednesday that he will move to pass his measure, which he describes as his "Plan B", through the House Thursday but Obama warned he would veto the legislation.
"At some point there's got to be... a recognition on the part of my Republican friends that, you know, take the deal," Obama told reporters, as the two sides struggled to reach agreement.
While both sides have rejected the other's offers for a deal they said that talks are ongoing.
However, US traders were not impressed. On Wall Street the Dow finished 0.74 percent lower, the S&P 500 dropped 0.76 percent and the Nasdaq lost 0.33 percent.
On forex markets investors are looking to see what measures the Bank of Japan will announce to boost the economy, days after a landslide election win for the opposition Liberal Democratic Party, whose leader has vowed to press for more aggressive easing.
"Given the supermajority election wins, the BoJ would be very unwise to ignore the people's decision," an equity strategist at a foreign brokerage told Dow Jones Newswires.
The yen has tumbled against the dollar and euro in recent weeks on the expected victory but picked up slightly in early trade Thursday.
The greenback bought 84.20 yen, compared with 84.39 yen in New York late Wednesday, while the euro was at 111.37 yen, from 111.59 yen.
The single currency also fetched US$1.3222, against US$1.3226.
Oil prices were lower, with New York's main contract, light sweet crude for delivery in February falling 32 cents to US$89.67 a barrel and Brent North Sea crude for February dipping 21 cents to US$110.11.
Gold was at US$1,667.40 at 0210 GMT compared with US$1,674.39 late Wednesday.