Asian markets were mixed Friday as traders grew concerned that talks on averting the US fiscal cliff remain deadlocked, while a Japanese survey showed confidence among businesses has slumped.
Currency investors continue to sell the yen in the last working day before Japan holds a general election on Sunday that is expected to see the ruling party ousted.
Tokyo fell 0.33 percent, Hong Kong added 0.10 percent, Shanghai rose 0.77 percent and Sydney was 0.17 percent higher, while Seoul eased 0.69 percent.
Investors are also taking the opportunity to cash in recent gains as the Christmas break approaches.
Markets are nervous that US lawmakers seem to be making slow progress on an agreement to avert the $600 billion in spending cuts and tax hikes slated to come into effect on January 1 and which could send the economy into recession.
President Barack Obama and Republican House Speaker John Boehner held what were described as "frank" talks Thursday but there was little sign they had found common ground on a more bearable plan to cut the country's huge deficit.
Wall Street ended in the red with the Dow off 0.56 percent, the S&P 500 retreating 0.63 percent and the Nasdaq dropping 0.72 percent.
Adding to the sense of pessimism is the latest quarterly Tankan survey of manufacturers' sentiment by the Bank of Japan, which showed a steep fall in confidence.
The index came in at minus 12, a big fall from the minus three seen in the third quarter. Economists had expected a reading of minus 10.
The figures, which represent the percentage of firms saying business conditions are good minus those saying they are bad, are a key measure used by the BoJ in formulating monetary policy.
Japanese shares were given some support, however, by the continuing weakness of the yen, which has tumbled since last month when the ruling Democratic Party of Japan announced a general election for December 16.
Prime Minister Yoshihiko Noda's party is expected to be easily beaten by the Liberal Democratic Party headed by Shinzo Abe, a former premier who has promised to push for more aggressive monetary easing to jumpstart the economy.
In early trade on Friday the dollar bought 83.71 yen, compared with 83.64 yen in New York Thursday afternoon, while the euro bought 109.42 yen, from 109.38 yen and $1.3072 from $1.3073.
Oil prices were higher, with New York's main contract, light sweet crude for delivery in January adding 38 cents to $86.27 a barrel and Brent North Sea crude for January delivery gaining 30 cents to $108.21.
Gold was at $1,698.20 at 0230 GMT compared with $1,695.60 late Thursday.