The Nikkei 225 Average reversed earlier gains and extended its losing streak to the third straight session as the strong yen dampened investor sentiment amid a lack of factors driving up the market.
South Korea's KOSPI ended down 1.7 percent, as lingering worries about subprime mortgage-related losses at U.S. financial firms hit lenders such as Kookmin Bank. Exporters including Samsung Electronics also fell on continuing concerns that the credit crunch may hurt growth in the U.S. economy, South Korea's No.2 export market.
Australian shares finished 1.1 percent higher as stronger oil prices lifted resource firms such as
Woodside Petroleum and BHP Billiton, while investors bought back beaten-down banking stocks. Building materials maker James Hardie Industries climbed over 5 percent after it posted a 32 percent fall in second-quarter profit, hit by a drop in home building in the United States. Hardie said it was comfortable with the bottom end of analysts' full-year forecasts.
Singapore's Straits Times Index turned lower with blue chips performing mixed.
Hong Kong stocks closed lower by 0.6 percent after a volatile trading session, with China plays down heavily on worries that mainland fund flows would stall, but Bank of East Asia jumped in heavy volume in an arranged cross trade. The market swung into positive terrain earlier in the session but was unable to sustain the momentum as investors worried fund inflows from the mainland would stall following reports that China's central bank had ordered Shenzhen banks to limit cash withdrawals to curb flows to the city's stock market.
Most Chinese shares ended higher, but the Shanghai Composite Index was dragged lower by 0.9 percent as heavily weighted stocks such as Petrochina fell as investors worried they may be overvalued.