TOKYO - A brief rally in Tokyo shares fizzled out by the end of Friday trading, dragging the market to its lowest close in more than three months as a stronger yen dented exporters.
The Japanese market looked set to rebound from the previous day's huge loss, when the benchmark Nikkei 225 tumbled nearly three per cent.
But jitters quickly returned despite a brief pick up in oil prices, prompting investors to buy the yen, which is seen as a safe bet in times of turmoil and uncertainty.
A stronger yen hurts the profitability of Japan's exporters, however, and tends to knock on demand for their shares.
In Tokyo forex trading, the dollar dropped back to 117.61 yen from 118.06 yen in New York.
"Overall it's still risk-off," Masahiro Ichikawa, senior strategist at Sumitomo Mitsui Asset Management, told Bloomberg News.
"Oil was rebounding but that is just short term." At the close, the Nikkei was down 0.54 per cent, or 93.84 points, to 17,147.11, its lowest finish since late September.
The broader Topix index of all first-section shares slipped 0.29 per cent, or 4.10 points, to 1,402.45.
Toyota shares fell 0.55 per cent to 6,759 yen, Sony was down 1.50 per cent at 2,582.5 yen, and Uniqlo-operator Fast Retailing, a market heavyweight, dropped 1.70 per cent to 37,000 yen.
China-linked factory robotics firm Fanuc shed 1.06 per cent to end at 18,515 yen.
Nissan slumped 1.90 per cent to 1,106 yen, after its partner Renault's diesel cars failed government-ordered pollution tests and investigators raided its facilities Thursday.
It raised fears the French car marker could be caught up in an emissions controversy similar to the one engulfing Germany's Volkswagen, which admitted in September to having installed pollution cheating software on 11 million diesel vehicles worldwide, sparking a scandal that could cost it tens of billions of dollars.
Officials said, however, that no such software was found on Renault cars.
Sharp's volatile stock soared 14.67 per cent to 125 yen after the top-selling Yomiuri newspaper said Taiwan's Hon Hai Precision may boost its bid for the embattled smartphone-screen maker by 40 per cent to 700 billion yen (S$8.5 billion).