Most Asian markets fell Friday on a mixture of regional factors - ranging from the expectation that China may raise interest rates soon to signs of growing pessimism among Japanese corporate executives.
Lingering worries about the fallout from the subprime mortgage crisis in the U.S., a vital export market, continued to weigh on sentiment.
In Tokyo, the benchmark Nikkei 225 stock index fell 22.01 points, or 0.14%, to 15,514.51 points, bringing its three-day loss to 3.3%.
Investors were disappointed by the Bank of Japan's quarter "tankan" survey that showed confidence at major Japanese companies has fallen to its lowest in more than two years amid worries about the strong yen and higher oil prices.
The survey's most-watched number, the sentiment index for large manufacturers, fell to 19 from 23 last quarter, the lowest since September 2005.
Real estate companies like Mitsui Fudosan Co. were among the decliners.
Banking stocks also fell after Citigroup Inc. said overnight it plans to assume control of the seven "structured investment vehicles" the bank advises to help them repay their debts. Mizuho Financial Group sank 4.9% and Mitsubishi UFJ Financial Group fell 4.78%.
Meanwhile, the dollar's recent recovery against the yen helped lifted exporters like Matsushita Electric Industrial Co. and Nintendo.
With no major market-moving news expected next week, traders expect the Nikkei to be volatile.
"That's what is likely to happen while the market lacks domestic catalysts," said Hitoshi Yamamoto, CEO of Fortis Asset Management Japan.
In Hong Kong, shares fell on continued concern about the U.S. economy and expectations China might raise interest rates this weekend to curb inflation.
The blue-chip Hang Seng Index fell 180.81 points, or 0.65%, to 27,563.64. It has dropped 6.8% since it closed at 29,530.32 last Thursday.
Traders said the correction may not be over yet and selling pressure will remain in the near term on continuing concerns over the weakening U.S. economy.
"Trading has become lethargic with no positive leads now," said Castor Pang, a strategist at Sun Hung Kai Research.
Banks were under pressure Friday on uncertainty over the impact of the sub-prime crisis. China Construction Bank dropped 2.4%.
Many mainland Chinese companies fell on expectations China's central bank may raise interest rates over the weekend to curb accelerating inflation.
But on the mainland, stocks rose, led by strong gains in liquor makers who are expected to benefit from higher food prices. A rebound in property developers also helped buoy the market.
The benchmark Shanghai Composite Index gained 1%, or 49.86 points, to 5,007.91.
In currency, the dollar was trading at Y112.42 at 0750 GMT Friday, up from Y112.21 late Thursday in New York.
The euro edged down to $1.4625 from $1.4627.
Elsewhere, Thailand's main stock index rose 0.4% to 836.40.
Indonesian shares fell amid the general risk aversion clouding regional markets. The main stock index dropped 0.6% to finish at 2,740.1.
Malaysian shares declined in profit-taking ahead of the weekend, with overall trading activity sluggish. The Kuala Lumpur Composite Index fell 0.5% to 1,403.4.
Philippine shares tumbled, hurt by foreign selling as stock markets retreated around the region. The Philippine Stock Exchange Index fell 2.4% to 3,538.7.
South Korean shares fell as stock of companies with business in China were dragged lower on worries about higher rates and that new Chinese labor laws will make it more difficult next year on foreign companies operating there. The Korea Composite Stock Price Index, or Kospi, fell 1.1% to 1,895.1.
Singapore shares dropped for the third straight session on the enduring worries over the U.S. economy and as markets dropped throughout Asia. The Straits Times Index lost 0.4% to close at 3,466.4.
Australian stocks fell on broad selling as traders fretted about how Wall Street might react to more news on the U.S. subprime lending crisis. The benchmark S&P/ASX 200 index dropped 1.6% to 6,491.7.
Taiwan's main stock index fell to a four-month low on continued concerns over rising labor costs in China, where many of the island's companies have operations. The Weighted Price Index of the Taiwan Stock Exchange shed 0.9% to finish at 8,118.1.
New Zealand stocks rose slightly as worries over problems in global credit markets, high domestic interest rates and a strong local currency kept investors on the sidelines. The benchmark NZX-50 gained 0.2% to 4,008.7.