Tokyo's Nikkei stock index slipped 1.38 percent by the break Friday on profit-taking after it hit a four and a half-year high this week and as the yen picked rebounded from recent lows.
The benchmark Nikkei 225 index lost 156.63 points to 11,200.44, while the Topix index of all first-section shares lost 0.95 percent, or 9.18 points, to 960.00.
"The market is due for another pullback as it remains overheated and ripe for profit-taking, especially with the holiday-extended three-day weekend coming up," said SMBC Nikko Securities general manager of equities Hiroichi Nishi. Tokyo markets are closed Monday for a national holiday.
"The 'energy' in the market remains very strong, however," he added.
The Nikkei finished in negative territory on Thursday, a day after it surged almost four percent to its best finish since September 2008.
The Tokyo market has surged in the past couple of months as the yen dropped on the back of a new conservative government in Japan pledging to fix the economy with big spending and aggressive monetary easing.
However, the Japanese unit was higher against the dollar and euro Friday.
The dollar bought 93.49 yen from 93.61 yen in late New York trade Thursday, while the euro was at 125.37 yen, from 125.40 yen.
The Japanese unit had been as low as 94.06 and 127.71 earlier this week thanks to expectations of further Bank of Japan monetary easing as well as rising confidence in the global outlook.
The euro also fetched $1.3407, compared with $1.3395.
On Wall Street the Dow provided a soft lead for Japanese investors, ending 0.30 percent lower at 13,944.05 after edging close to a record high last week.
Official data Friday showed the surplus in Japan's current account, the broadest measure of trade with the rest of the world, nearly halved on-year to 4.7 trillion yen in 2012, the smallest since 1985, as exports to Europe and China slumped.
"While the yen's recent weakening will help exports to recover somewhat, the same yen weakness will push up costs for imported goods and materials," Toshihiro Nagahama, chief economist at Dai-Ichi Life Research Institute, told Dow Jones Newswires.
"That means any current account surplus will never return to the level where it once was."
In Tokyo trade, Sony slumped 8.95 percent to 1,383 yen, on disappointing earnings figures, despite saying its net loss from April to December shrinking 75 percent on-year and that it remains on track to achieve a full-year profit.
Small-car maker Suzuki was off 3.81 percent to 2,318 yen, with earnings missing expectations.
Fujitsu climbed 2.66 percent to 424 yen, as it announced restructuring plans, including thousands of layoffs, following a loss of nearly $1.0 billion in the nine months to December.