Japan's Nikkei average slid 2 per cent on Thursday, hit by a late yen rise, but still booked its best monthly performance in six months, helped by hopes the central bank will ease policy further and that the yen's rapid advance could be curbed by more intervention by the authorities.
But the benchmark edged down 0.1 per cent for the quarter, sharply lagging other major world indexes.
The yen advanced against the euro, and against the US dollar as well, after Ireland's central bank put a 34 billion euro price on bailing out Anglo Irish Bank under a worst case scenario and said Allied Irish Banks needs to raise an additional 3 billion euros by the end of the year.
Market players said investors began dumping shares in late trade after expected window-dressing -- or buying of some of the quarter's better performers by fund managers to improve their books -- failed to emerge, with the yen rise also feeding sales.
"I think the next quarter will likely see the market testing the downside in a tug-of-war between hopes for policy easing and the worsening world economy," said Yutaka Miura, senior technical adviser at Mizuho Securities.
"The Nikkei could break below 9,000 over the next month or two, with the upcoming first-half results likely seeing some downward revisions mainly on the stronger yen."
The benchmark Nikkei fell 190.03 points to 9,369.35, the day's low, but still managed to post a 6.2 per cent gain for the month of September, its best monthly rise since March.
The broader Topix fell 2.1 per cent to 829.51.
Despite the monthly rise, persistent worries about the threat a strong yen poses to the fragile economic recovery sent the Nikkei down 0.1 percent for the July-September quarter. The MSCI index of Asia Pacific stocks outside Japan shot up some 17 per cent in the same period.
The euro lost 0.7 per cent against the yen to 113.21 yen and the dollar fell 0.4 per cent to 83.39 yen after earlier falling to its lowest level since Japan intervened to support the dollar on September 15.
"News about the Irish banks has made a lot of investors nervous about European banks in general," said Hiroaki Kuramochi, chief equity marketing officer at Tokai Tokyo Securities.
"Investors are also worried about what could happen to the yen in case there isn't any intervention by the authorities soon."
Expectations grew that the Bank of Japan will discuss easing monetary policy further at a meeting next week after a poor December outlook in the central bank's "tankan" survey of business sentiment released on Wednesday.
Reuters