The benchmark Nikkei 225 index at the Tokyo Stock Exchange fell 112.39 points to 8,367.24 by the lunch break, falling below the 8,400 mark for the first time since October 5.
The Topix index of all first-section issues dropped 1.17 percent, or 8.54 points, to 719.17.
Escalating worries over the eurozone debt crisis dragged Tokyo stocks down, said Hideyuki Ishiguro, supervisor at investment strategy at Okasan Securities, with a stronger yen denting sentiment.
"Every day, the Nikkei is weighed down by negative developments in overseas markets," he told Dow Jones Newswires.
In New York the Dow Jones Industrial Average closed down 1.13 percent at 11,770.73 on Thursday.
However, the downside for the Nikkei may be limited ahead of the weekend and as its valuation is becoming more attractive, Nishi added.
Spain was forced to offer euro-era-high average yields at its 10-year government bond auction Thursday.
France also had to pay higher prices for debt at its auction.
In Italy, Prime Minister Mario Monti laid out radical economic reforms on Thursday aimed at cutting Rome's huge debt mountain, boosting growth and preventing Italy from dragging down the eurozone.
The euro fetched $1.3460 and 103.61 yen in Tokyo morning trade on Friday, almost unchanged from New York late Thursday.
The dollar was flat against the Japanese currency, trading at 76.97 yen.
Financials are lower, with Mizuho Financial Group down 1.98 percent at 99 yen, below 100 yen for the first time since 2003.
Olympus, embroiled in a loss cover-up scandal, plunged 8.29 percent to 685 yen Friday morning on on profit taking after gaining 62 percent over the past four sessions.
The shares of major Japanese exporters were also lower on the deepening European debt crisis, which sent the yen higher, said a senior strategist at a Japanese brokerage.
Suzuki Motor slipped 2.23 percent to 1,573 yen despite a Nikkei daily report that the company will build a new factory for passenger cars in China and double the production capacity of its Chongqing-based joint venture.