TOKYO: Japan's Nikkei average fell 0.7 percent on Wednesday as the yen fell back slightly, helping exporters such as Canon Inc cut losses, as optimism over a US Federal Reserve bailout fought with fears over global economic gloom.
Panasonic Corp shed more than 2 percent after Goldman Sachs said it had broken off talks on the possible sale of Goldman's shares in Sanyo Electric Co Ltd.
Though the market welcomed the Federal Reserve's massive new programme to aid the beleaguered American consumer, a programme that helped the Dow and S&P 500 extend gains on Tuesday, many players noted that numerous problems remain and have yet to be adequately dealt with.
"The Fed appears to have moved quickly, but how soon will this policy actually have an impact? In a way, its scale underlines how serious the situation is," said Takashi Ushio, head of the investment strategy division at Marusan Securities.
"The problems of GM and Ford still remain, so there's still a lot of uncertainty."
The benchmark Nikkei had shed 53.95 points to 8,270.79, while the broader Topix was down 1.1 percent to 822.79 as investors grappled with the meaning and potential of the recent US moves.
"As far as the US financial sector goes, it seems as if the worst is over, and (President-elect Barack) Obama is moving very energetically on the economy," said Takahiko Murai, general manager of equities at Nozomi Securites. "But in some ways there is a sense that it may already be too late."
Shares were moving more on individual factors than sector-wide ones, with some so-called defensive shares providing support as investors sought to avoid more risky shares with overseas connections while others were sold off for profit.
Exporters were hit by a report showing the US economy shrank at a faster rate in the third quarter than was originally estimated, while the fall in US house prices accelerated.
Toyota Motor Co slipped 4.2 percent to 3,000 yen, while Honda Motor Co fell 1.7 percent to 2,055 yen. Canon Inc was down 1.2 percent at 2,875 yen.
Panasonic lost 2.4 percent to 1,363 yen.
Communications shares were strong, with KDDI Corp up 1.6 percent at 620,000 yen and Softbank Corp up 2.2 percent at 1,333 yen.