Japan's Nikkei 225 retreated from a 6-week high on Friday as investors locked in gains and turned cautious over the outlook for interest rates, inflation, and geopolitical risks.
The benchmark Nikkei slid 0.94% to close at 68,309.46, shaving its weekly advance to 2.9%. The broader Topix slipped roughly 1% to 4,091.00.
US stocks ended higher overnight as Treasury yields retreated from multi-decade highs, but the overall tone remained choppy with investors focused on the Federal Reserve's rate trajectory and inflation risks.
In Japan, data showed core inflation in Tokyo accelerated in September at the fastest pace in 10 months, bolstering the case for further rate hikes. Geopolitical tensions also weighed, with the US-Iran war in the Middle East and fresh disruptions to global energy markets after China suspended oil product exports beyond Hong Kong and Macau.
After the Nikkei's 3.3% surge on Thursday, "concerns about short-term overheating are likely to lead to profit-taking," according to a note by Yuta Okamoto, an analyst at Tokai Tokyo Intelligence Laboratory.
Even so, the outlook for domestic shares remains positive, he added, bolstered by the Bank of Japan's tankan survey released on Thursday showing sentiment among large manufacturers rose for a sixth consecutive quarter.
"It appears that expectations for a rise in Japanese share prices, based on earnings prospects, remain high," Okamoto wrote.
Decliners outnumbered advancers in the Nikkei 225, with 173 stocks down and 51 rising.
The largest losers were SoftBank Group, down 5.83%, followed by Nissan Motor, trading 4.97% lower and marking its lowest close since February 2009, and Terumo , which lost 4.59%.
The largest percentage gainers in the index were Resonac Holdings, which rose 8.71%, followed by Furukawa Electric, up 7.68%, and Baycurrent, which gained 6.15%.
