Japanese stocks ended lower on Monday for a second straight session, with a profit warning from Sanyo Electric dragging down technology shares and profit-taking continuing to weigh on recent high-flyers like real estate firms.
Exporters such as Toyota Motor Corp also wilted after another fall on Wall Street and instability in the currency market.
But overall falls were limited as optimism about Japan's economic recovery lifted some banks and insurers. In addition, Mitsubishi Electric Corp rose 3.23 percent to 21-month highs after it raised its profit forecast.
The benchmark Nikkei average lost 0.88 percent to close at 11,318.51, after losing 65.77 points on Friday.
The broader TOPIX index shed 0.58 percent to 1,131.50.
The dollar jumped against the yen to around 107.40 yen up from 106.65 in late New York on Friday. By late Monday in Tokyo it was back down to around 107 yen.
"Wall Street's losses and the currency volatility are hurting investors' appetite for exporters. Market sentiment is also being dampened as buyers have started avoiding domestic stocks," said Masayoshi Okamoto, head of dealing at Jujiya Securities.
But he said the market's tone remained bullish amid optimism about Japan's economic recovery, and said Monday's losses in real estate firms and some other domestic business-related stocks were mainly due to profit-taking after the recent rally and ahead of the release of land price data.
Shares in consumer electronics firm Sanyo Electric, one of the world's top makers of digital cameras, tumbled 5.33 percent to 497 yen, making it the biggest percentage loser among the Nikkei 225 component stocks.
Last Friday the company slashed its net profit estimate for the year to March 31 by 88 percent, hurt by poor sales of home appliances and a 15 billion yen ($140 million) investment loss.
Sanyo's surprise announcement triggered selling among its peers, slashing NEC Corp by 2.4 percent to 813 yen.
Sony Corp was down 2.11 percent at 4,180 yen. After the close, the tech bellwether said it was planning a further 25 billion yen in restructuring charges, bringing the total for the business year ending on March 31 to 175 billion yen. A Sony spokesman told Reuters it was assessing what impact this would have on its profit forecast for the year
A notable winner, however, was Mitsubishi Electric Corp, which rebounded after raising its full-year profit forecast in the afternoon.
Its shares climbed 3.23 percent to 608 yen, their highest since June 2002.
Toyota, Japan's biggest auto maker, lost 1.86 percent to 3,690 yen, while smaller rival Nissan Motor Co Ltd fell 1.94 percent to 1,160 yen.
Decliners outnumbered gainers 734 to 703. Volume fell, with 1.32 billion shares changing hands, the lowest since February 25.
The real estate sector suffered big losses, with industry leader Mitsui Fudosan Co falling 3.18 percent to 1,218 yen. Mitsubishi Estate Co Ltd lost 1.69 percent to 1,337 yen, and the real estate industry sub-index slipped 1.58 percent.
Analysts said investors locked in profits in real estate firms after the sector had been bought in the past few sessions on expectations that government data would show a slowdown in the fall in land prices in 2003. Prices have fallen since the bursting of Japan's asset bubble over a decade ago.
The data, released late on Monday, showed that commercial land prices fell 7.4 percent in 2003, compared with the previous year's 8.0 percent fall - the second straight year that the rate of decline had fallen.
Nationwide residential land prices fell 5.7 percent compared with a 5.8 percent fall in 2002.
Fujio Ando, an analyst from Chiba Bank Asset Management, had said a slowdown in the fall in commercial land prices in big cities would mean buyers would likely to return to real estate, general contractors and other land-related stocks from Tuesday.
Meanwhile, suggesting investors' optimism over the domestic economic recovery, Mitsubishi Tokyo Financial Group Inc closed up 0.52 percent at 965,000 yen and Bank of Yokohama Ltd, Japan's biggest regional bank, jumped 4.41 percent to 592 yen.
Non-life insurance firm Millea Holdings Inc rose 1.84 percent to 1.66 million yen.
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