Japan's Nikkei average fell 0.9 percent on Thursday, dented by Honda Motor Co and other exporters as the yen climbed to a two-month high on the dollar and after the Federal Reserve cut its outlook for the U.S. economy.
Tech shares fell in the wake of losses by their U.S. peers, with Sony Corp edging down despite saying it plans to halve the number of its parts and materials suppliers.
But shares in smelters provided some support after the Nikkei business daily said Mitsubishi Materials, Japan's third-largest copper smelter, would resume full production in August in response to an uptick in demand from domestic automakers.
"The market isn't in a position to test above 9,500 as the economic outlook isn't really upbeat as the GDP data showed, and there's a lack of trading news with the earnings season out the way," said Mitsushige Akino, chief fund manager at Ichiyoshi Investment Management.
"Investors have locked in profits for now, but they are not pushing the market sharply lower either, as there's no doubt fundamentals are improving and they believe the market already hit bottom when it fell to around 7,000 on March 10."
Data showed on Wednesday that Japan's first-quarter gross domestic product shrank a record 4 percent as a plunge in global demand drove the country's export-driven economy further into recession, though the decline was broadly in line with expectations.
Market analysts also said the Fed's gloomy views on the economy, which included cutting its 2009 gross domestic product forecast and raising its outlook for unemployment, contributed to an overall mood of uncertainty.
In light trade, the benchmark Nikkei slipped 80.49 points to 9,264.15, after a two-day rally.
The broader Topix inched down 0.6 percent to 881.44.
The dollar fell as low as 94.28 yen on trading platform EBS, its lowest since March, after the Fed said it considered buying more securities at its last policy meeting, a move that would inject more dollars into the financial system.
In late afternoon, the dollar was trading around 94.60 yen.
Investors fret about a stronger yen because it eats into exporters' overseas profits when repatriated.
EXPORTERS DOWN
Exporters fell, with Honda slipping 1.5 percent to 2,645 yen and Canon Inc losing 2.4 percent to 3,230 yen.
Tech stocks were hit by both the yen's advance and a fall in the shares of their US peers after a negative outlook for 2009 from Hewlett-Packard.
Kyocera Corp retreated 1.2 percent to 7,290 yen and TDK Corp slid 2.1 percent to 4,260 yen.
Sony shares dipped 0.2 percent to 2,500 yen. The plan by Sony to decrease the number of its parts and materials suppliers came in addition to a current plan to cut fixed costs by more than 300 billion yen ($3.2 billion).
But Mizuho Investors Securities analyst Nobuo Kurahashi said the plan was "operational streamlining" that wouldn't "bear fruit immediately."
"But it is very good that we are seeing more and more concrete restructuring measures at a quick pace," he added.
Among stocks that gained, Mitsubishi Materials climbed 2.8 percent to 297 yen and Dowa Holdings advanced 3.5 percent to 418 yen. Sumitomo Metal Mining rose 0.2 percent to 1,234 yen.
Another notable gainer was Shikibo, which makes virus-resistant fibres used in products such as hospital uniforms and sheets, after the first cases of H1N1 flu were reported in the densely populated Tokyo area on Wednesday.
Shikibo shares jumped 4.4 percent to 190 yen, after earlier surging more than 14 percent.
Some 2 billion shares changed hands on the Tokyo exchange's first section, below last week's daily average of 2.5 billion.
Declining stocks outnumbered advancing ones, 950 to 599.
