TOKYO The Nikkei stock average slid below 8,400 to its lowest level in more than a month, after surging bond yields in euro zone nations spooked investors and fueled fears of tightening global credit conditions.
Shares of Olympus Corp (7733.T) snapped four days of gains, tumbling more than 16 percent but still gaining 35.9 percent for the week. Japanese prosecutors are set to question its former president over an accounting scandal engulfing the firm, as investigators probe for possible involvement of organized crime, media reports said.
The premium of Spanish and French bonds over German Bunds hit euro-era highs after poor demand at debt sales.
In a sign that global funding strains may spread to Asia, benchmark three-month euro/yen interest rates futures fell to an eight-month low on Friday on concerns that tightness in dollar money markets may prompt non-Japanese banks to raise yen at a higher rate.
Concerns about a global credit crunch weighed on banking shares, with Mizuho Financial Group (8411.T) falling below 100 yen for the first time since 2003.
But strategists said the Nikkei's ability to stay above support at the October 5 intraday low of 8,343 was a positive sign that the market could be forming a bottom above its March 15 low at 8,227.
"With worries about Europe and U.S. stock losses, it's difficult to be optimistic about gains, but the Nikkei could be set to trade sideways into next week, depending on overseas developments," said Toshiyuki Kanayama, senior market analyst at Monex Inc.
Volume was thin, with 1.45 billion shares trading on the main board, falling short of Thursday's 1.52 billion shares and last week's average volume of 1.74 billion.
Wednesday is a Japanese holiday, which could keep trading volume thin next week, market participants said.
Olympus tumbled 16.3 percent to 625 yen and was the heaviest-traded issue by turnover. Shares of the scandal-hit company have lost 74.8 percent of their value since it ousted former CEO Michael Woodford on October 14.
The New York Times reported that Japanese officials are investigating an apparent $4.9 billion hole in the company's accounts as well as the possible involvement of organized crime in its accounting scandal.
Even as speculators bought back Olympus shares on fading expectations the issue would be delisted, long-term holders have been cutting their holdings. Mitsubishi UFJ Financial Group (8306.T) units have sold some of their shares, reducing their collective stake in Olympus to 7.61 percent from 10 percent, according to a regulatory filing on Friday.
Mitsubishi UFJ (8306.T) shares fell 1.8 percent to 325 yen, while rival Sumitomo Financial Group (8316.T) dropped 2.8 percent to 2,051 yen.
Shares of Mizuho (8411.T) ended down 2 percent at 99 yen, slipping below 100 yen for the first time in eight years.
Export-reliant automakers underperformed the broad market, with the dollar below 77.00 yen and the yen near a five-week high against the euro.
Toyota Motor Corp (7203.T) was down 2.3 percent at 2,448 yen after earlier dropping to 2,442 yen, its lowest since 1996. It was the fourth-heaviest traded issue by turnover on the main board.
Honda Motor Co (7267.T) shed 2.4 percent to 2,202 yen and Nissan Motor Co (7201.T) dropped 2.5 percent to 673 yen.
The yen's strength is forcing Toyota and Nissan to consider changes in production plans and alliance strategies, the top executives of both firms said on Thursday. [ID:nL3E7MI0DX] ($1 = 76.985 Japanese Yen)
(Additional reporting by Mari Saito; Editing by Joseph Radford)