Tokyo stocks deepened their losses on Friday as political uncertainty grew following reports that Prime Minister Shinzo Abe is planning to step down.
The Nikkei average of 225 selected issues on the first section of the Tokyo Stock Exchange fell 326.21 points, or 1.41 percent, to end at 22,882.65. On Thursday, the key market gauge lost 82.00 points.
The Topix index of all first-section issues finished down 11.02 points, or 0.68 percent, at 1,604.87 after sagging 8.59 points the previous day.
After briefly losing over 600 points on news of Abe's resignation, the Nikkei trimmed losses on buybacks, brokers said.
Concerns over Abe's health have mounted after he visited a Tokyo hospital on Aug. 17 and again on Monday.
"Heavy selling hit stocks from those who are concerned that Abe's resignation may stir political turmoil, on fears that no suitable successor to him is around," said Masayuki Otani, chief market analyst at Securities Japan Inc.
Another brokerage official said, "Foreign investors apparently reacted to news of Abe's resignation with selling, as doubts arose over the consistency of the government's current economic policies."
But calmness returned to the market later as investors bet that major policy changes are unlikely amid the coronavirus crisis, Otani said.
Falling issues outnumbered rising ones 1,543 to 568 in the TSE's first section, while 58 issues were unchanged.
Volume grew to 1.666 billion shares from Thursday's 923 million shares.
Technology names such as Sony and Tokyo Electron fell following an overnight drop in the U.S. tech-heavy Nasdaq composite index.
Supermarket chain Kobe Bussan lost 7.67 percent after announcing smaller year-on-year growth in sales for July.
Among other losers were clothing store chain Fast Retailing and tech investor SoftBank Group.
On the other hand, financials including banking group Mitsubishi UFJ and insurer Tokio Marine rose thanks to a rise in U.S. long-term interest rates.
Also on the positive side were convenience store chain FamilyMart and cosmetics maker Shiseido.
In index futures trading on the Osaka Exchange, the key September contract on the Nikkei average fell 320 points to end at 22,890.