Tokyo stocks closed marginally lower Thursday with markets on edge over US-North Korea tensions, although Japanese cosmetics giant Shiseido surged on upbeat earnings.
The loss of appetite for risk followed North Korea's claim it was completing plans to fire four intermediate-range missiles over Japan to land near the U.S. Pacific territory of Guam in an unusually detailed threat. Eastern time. The Dow Jones industrial average slid 120 points, or 0.5 percent, to 21,928.
United States stocks ended lower on Thursday, and Asian markets fell sharply, with Hong Kong's Hang Seng index dropping 2%.
Many world stock markets have hit record or multi-year highs in recent weeks, leaving them vulnerable to a sell-off, and the tensions have proved the trigger.
"Equities look set to end this week on a downer, as geopolitical uncertainty regarding North Korea shakes volatility from its 2017 slumber", said Accendon Markets analyst Mike van Dulken.
All three USA indices fell sharply, with the broad-based S&P 500 tumbling 1.5 percent.
NORTH KOREA: President Donald Trump warned North Korea of "fire and fury" this week in response to recent threats from Pyongyang, which said it was examining plans for attacking Guam, a US territory in the Pacific with a military base.
The Japanese yen strengthened by 0.5% to about 109.70 per dollar. The annual rate stood at 1.8%, which was below the 1.9% observed last month and the forecast of 2.1%.
USA stocks closed slightly lower Wednesday, making up much of the ground they lost earlier following a rare batch of earnings disappointments by Walt Disney and other big companies.More news: Daily life in North Korea
Geopolitics aside, investors would also focus on United States economic data and monetary policy, with inflation data being released and two Federal Reserve policymakers making an appearance, Erlam said. Gold prices touched their highest level in more than two months at US$1,285.76 an ounce.
Bond prices, which move inversely to yields, closed higher.
Spot gold was up 0.3% at $1,290.36 USA per ounce, set for its biggest weekly gains since April.
This week has seen its biggest rise since June 2016.
Ongoing global glut concerns lingered in oil markets despite a bigger-than-expected draw in USA crude inventories, leaving prices volatile. Brent crude, used to price worldwide oils, slid 52 cents, or 1 percent, to $52.18. Geopolitical risks can boost demand for assets considered safe-haven investments, such as gold.
As a result, Germany's 10-year government bond yields - which move inversely to the price - dropped below 0.40 percent for the first time since June 29, nearly 20 bps below its July peak.
Japanese, British and US 10-year government bond yields are also at or close to their lowest level since late June.
US DATA: The other potential driver in markets will be upcoming USA economic data, including monthly inflation figures, which could go a long way to determining expectations for the pace at which the Federal Reserve raises interest rates. "So we're not going to get to a year-over-year number of 2-percent until some of these very low readings drop out of the statistics 6 to 10 months from now".