By V. Phani Kumar, Colin Ng and Matthew Allen
HONG KONG (MarketWatch) -- Major Asian markets retreated heading into the weekend on Friday as concerns over the global economic outlook persisted in the wake of overnight losses on Wall Street and lingering worries over European sovereign debt.
Japanese stocks took the biggest fall amid modest trading volumes as exporters lost more ground on worries the yen would continue to strengthen and on fears the ruling government might increase the consumption tax rate.
"The volume is very thin because this is a week of shareholder meetings. This period tends to be very inactive... Japanese markets are more volatile than the other markets because of the lack of volume," said Yoji Takeda, head of Asian equities at RBC Investment.
Talk of an increase in consumption tax was a "special negative" for sentiment, said Mr. Takeda. Kyodo news service Friday reported, citing senior lawmakers in the ruling Democratic Party of Japan, that the government will fight an upcoming Upper House election with a pledge to double Japan's consumption tax to 10%.
Japan's Nikkei Stock Average lost 1.9% to 9,737.48, while Australia's S&P/ASX 200 shed 1.5% for a fourth-straight drop. South Korea's Kospi lost 0.6%, Taiwan's Taiex shed 1.5%, China's Shanghai Composite Index lost 0.5% and the Hang Seng Index slid 0.2% in Hong Kong. India's Sensex gave up 0.7% and Singapore's Straits Times rose 0.1% in afternoon trading.
Dow Jones Industrial Average /zigman2/quotes/210598065/realtime DJIA +1.22% futures were up 12 points in screen trade.
"Renewed concern about Greek sovereign-default risk, combined with U.S. financial regulation and recent weakness in U.S. economic data have equity markets up against the ropes," said IG Markets Strategist Ben Potter in Sydney.
Taiwanese shares fell after the island's central bank increased its policy interest rate in a surprise decision announced after the markets closed Thursday. Real-estate shares skidded, with Cathay Real Estate Development falling 2.1%, Farglory Land Development dropping 4.8% and Hung Poo Real Estate Development sliding 4.5%. Read full story on the stock impact in Taipei.
The surprise 0.125 percentage point rate increase, coupled with curbs on mortgages for areas in and around the capital, is "a shot across the bow of Greater Taipei's hot property market," said Yuanta Securities strategist John Brebeck.
Japanese technology exporters suffered heavy losses as wider Greek credit default swaps and signs of weakening U.S. consumer spending heightened concerns over the yen's strength, which would hurt their profitability.
Canon /zigman2/quotes/210242912/composite CAJ +0.89% /zigman2/quotes/207639533/delayed JP:7751 +0.62% lost 4.5%, Fanuc /zigman2/quotes/202054799/delayed JP:6954 -0.14% /zigman2/quotes/209410825/delayed FANUY +0.72% gave up 4.6%, Panasonic /zigman2/quotes/201785256/delayed JP:6752 -0.96% dropped 2.1% and Tokyo Electron /zigman2/quotes/206919677/delayed TOELY +1.43% /zigman2/quotes/202883609/delayed JP:8035 +0.20% sank 5.6%.
Banking majors fell less than the broad market following reports in the Nikkei and the Financial Times that the Basel Committee on Banking Supervision could soften plans for new capital mandates for banks, after intense lobbying by the industry. Mitsubishi UFJ Financial Group /zigman2/quotes/207520099/delayed JP:8306 +0.03% slipped 0.5% and Sumitomo Mitsui Financial Group /zigman2/quotes/203656770/delayed JP:8316 +0.15% dipped 0.7%.
Bridgestone /zigman2/quotes/204111038/delayed BRDCY +0.77% /zigman2/quotes/205589013/delayed JP:5108 -1.63% rose 0.8% after it raised its group net profit outlook for the first half of the year ending June 30.
In Sydney, shares of mining majors reversed some gains from Thursday, which came amid hopes Prime Minister Julia Gillard would water down the controversial Resources Super Profits Tax. BHP Billiton /zigman2/quotes/208108397/composite BHP +1.31% /zigman2/quotes/201448516/delayed AU:BHP -0.13% dropped 2.1% and Rio Tinto /zigman2/quotes/200083756/delayed AU:RIO 0.00% shed 3%, while Murchison Metals lost 4%.
Eurasia Group analyst Divya Reddy said industry expectations for a major shift in the government's stance on the tax were "likely overblown." She said the new leadership team of Ms. Gillard and Deputy Prime Minister Wayne Swan was closely associated with many of ousted Prime Minister Kevin Rudd's major policy decisions, which included scrapping of the emissions trading scheme and introducing RSPT.
Seoul-traded shares came off their early lows as local pension funds bought into stocks.