Weakness in the US technology sector and a fragile dollar tone against the yen were important in undermining support for Japanese stocks ahead of the US GDP data.
US indices were subjected to choppy trading on Thursday with a sharp decline in the technology sector in mid-session. The wider markets recovered ground with S&P 500 index losses held at 0.1%, although the Nasdaq index closed 0.6% lower.
There was a fresh decline in equity futures following Amazon’s results released after the New York close which maintained a defensive market tone at the Asian open.
Japanese household spending data was stronger than expected with a 2.3% increase in the year to June while unemployment declined to 2.8% from 3.1% previously.
The National underlying CPI data was in line with expectations at 0.4%, although the July Tokyo data was slightly stronger than expected with a rate of 0.2% from 0.0% the previous month.
The data provided net support to confidence in the economic outlook, although international factors tended to dominate market trends.
The dollar was unable to sustain gains seen during Thursday with USD/JPY declining to the 111.00 area from US highs around 111.70 which had a negative impact on Japanese stocks.
There were also significant regional losses with sharp corrections in Australia and South Korea which undermined sentiment and hampered Japanese equities.
After opening little changed, the Nikkei steadily lost ground during the morning session and there were no significant rally attempts during the day with a break below 20,000 also undermining confidence.
At the close, there was a Nikkei 225 decline of 119.80 points and 0.6% at 19,959.84.
Reaction to the US GDP data will be important for Asian equities next week with the risk of further volatile trading.
Nikkei 225 Index 4-Hour Chart