Nikkei closes down; Japan Airlines flat; Toyota, Panasonic down

Toyota shares fell despite the President Akio Toyoda apologising on Friday for the recalls which have encompassed now over 8 million vehicles.

The shares closed 1.1 pct down despite being positive for most of the day, and this morning reports of further recalls emerged as Reuters reported a global 2010 Prius recall to start tomorrow as Toyota prepares to file it officially with the Japanese Transport ministry.

Elsewhere, Panasonic was the one of the Nikkei's biggest faller as UBS downgraded it from 'buy' to 'hold' losing 5.3 pct.

Japan Airlines remained flat at virtually zero, after it announced it would honour its American Airlines One World alliance and end talks with Delta.

The two airlines had been competing for JAL's international network, especially in Asia with offers of financial aid to gain access.

However, JAL has now officially ended talks on the matter, with a continuing partnership with American Airlines preferred to Delta's offer.

The shift in foreign investment in Japanese stocks is heading towards 'neutral' as investors finally put a halt to a buying trend that has been since the yen fell, and the Nikkei lagged in 2009.

However, with the highest public debt-to-GDP ratio in the developed world and a shrinking population, investors have put a halt on Japanese shares.

"There was some profit-taking in Asia, and Japan, on a pure value basis, was just the logical place to come for many investors," said Michael Newman, the head of sales and Japan equity sales at Macquarie Capital Securities (Japan).

Meanwhile, emerging markets in China and India remain the favoured choice as the picture is much 'clearer' on macroeconomics:

"To be honest, it's much easier to go for Asian stocks such as China and India, the macro picture is much easier to read, but you have a lot of corporate governance problems you don't have here." said Pascal Masse, head of investment at Aberdeen Investment Management in Tokyo.