Japanese shares fell on Friday, retreating from a 32-month high as kidnappings in Iraq raised fears about global security and uncertainty about possible political implications, prompting selling across the board.
Japan Airlines System Corp, the country's largest airline, and other travel-related shares were among the hardest hit on expectations that the hostage crisis would curb demand for their services.
Arab television Al Jazeera aired a video on Thursday showing three Japanese nationals who it said had been taken hostage by an Iraqi group.
The group vowed to kill the three if Japanese troops did not leave Iraq, where they are on a reconstruction mission, within three days.
The key Nikkei average closed down 1.61 percent at 11,897.51. The benchmark hit a fresh 32-month high on Thursday. The broader TOPIX index fell 1.57 percent to 1,190.86.
Hiroichi Nishi, general manager of equity marketing at Nikko Cordial Securities, said investors had pushed stock prices up aggressively even though they knew the market was overheated and the hostage crisis was a wake-up call.
Trade volume fell with 1.76 billion shares changing hands on the first section, the lowest since April 2, and down from Thursday's total of 1.889 billion.
Japan Airlines System fell 3.1 percent to 344 yen and rival All Nippon Airways Co declined 2.5 percent to 351 yen.
Likewise, Japan's second-biggest travel agency, Kinki Nippon Tourist Co Ltd ended down 3.65 percent to 343 yen while discount travel agent HIS Co Ltd fell 1.44 percent to 2,740 yen.
Investors also grabbed profits and squared their positions ahead of the Easter weekend, with many players in the United States and Europe on holiday.
Broker shares were among the victims of profit taking after heady gains on swelling trade volume and turnover.
Industry leader Nomura Holdings slipped 2.54 percent to 1,880 yen while its peer Nikko Cordial Corp dropped 3.18 percent to 700 yen.
Other recent high-flyers such as banks, retail and construction shares were also ripe for profit taking. Kumagai Gumi Co lost 7.51 percent to 320 yen after posting a 30 percent gain on Thursday.
UFJ Holdings, the smallest of the four megabank groups, was down 2.97 percent at 718,000, after closing at 740,000 on Thursday, the highest finish since May 2001.
Ito-Yokado Ltd, Asia's second-biggest retailer by sales, was down 3.23 percent at 4,800 yen, after rising a total 7.6 percent ahead of its earnings results on Thursday.
It posted a 15 percent rise in net profit growth for 2003/04. A few bright spots included electronic components maker Murata Manufacturing Co Ltd, which gained 3.76 percent to 7,450 yen, after Goldman Sachs added the share to its Current Investment List on Friday.
Defence-related stocks also surged on renewed security concerns from the kidnappings in Iraq. Leading ammunition maker Hosoya Pyrotechnics Co jumped 11.39 percent to 401 yen.
Dust mask and safety equipment maker Koken Ltd rose 10.0 percent to 990 yen.
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