The Nikkei average of 225 issues fell for the third day in a row on Friday as concerns over a third wave of coronavirus infections weighed heavily on market sentiment.
The Nikkei average fell 106.97 points, or 0.42%, to close at 25,527.37, after slipping 93.80 points on Thursday.
The Topic Index of all issues in the first section of the Tokyo Stock Exchange ended almost unchanged, rising 0.98 points, or 0.06%, to 1,727.39, after rising 5.76 points the day before.
Stocks came under pressure after a curfew was declared in California to stem the spread of the coronavirus.
Reports of a record number of coronavirus cases in several prefectures also led to a drop in stocks.
There were squared sales of positions ahead of the national three-day weekend, but stocks were also supported by lower buying, brokers said.
The brokers said the recent spike in infections across Japan “will make actions sensitive to coronavirus news,” such as policies prefectural governors adopt to tackle the outbreak.
Despite concerns, many investors believe governments will not impose measures on the scale of those adopted in the spring, leaving the global economy relatively unscathed, said Hirohumi Yamamoto, strategist at Toyo Securities Co.
Market players also remain bullish on the long-term economic outlook after the deployment of a coronavirus vaccine and are therefore not engaging in a sale, Yamamoto added.
Masayuki Otani, chief market analyst at Securities Japan Inc., said many stocks have started or are starting to rebound after the downward correction that began earlier this week, noting that there were more winners than of declining on the first section of TSE.
The drop in stocks reflects high-priced stocks that are particularly susceptible to the coronavirus outbreak, such as transport names, said Masahiro Ichikawa, chief market strategist at Sumitomo Mitsui DS Asset Management Co.
In the first section of the TSE, rising stocks outnumbered declining 1,296 to 788, with 93 issues unchanged. Volume fell to 1.088 billion shares from 1.368 billion shares on Thursday.
Transportation issues such as Central Japan Railway, or JR Tokai, declined as cases of infection continued to rise.
Insurers have also been beaten. MS&AD plunged 4.38% and T&D fell 3.55%.
Pharmaceutical companies such as Chugai and Daiichi Sankyo have also attracted sales.
On the other hand, steelmakers are gaining ground. JFE rose 2.01% and Nippon Steel climbed 2.87%.
Other winners included technology investor SoftBank Group, which rose 2.62%.
In index futures trading on the Osaka Stock Exchange, the key December contract on the Nikkei average ended unchanged at 25,540.