Asian stocks were lower on Friday, as caution pervaded following warnings by the IMF and ratings agencies on United States and Japan.
Japan's Nikkei average fell more than 1 percent, with some analysts saying the Standard & Poor's downgrade of Japan's sovereign debt on Thursday may become a turning point for foreigners who have led a rally for the benchmark since November.
The S&P move matched an earlier ratings cut by Fitch and raised concerns about the risks of downgrades for other developed economies.
Downbeat earnings also hurt the benchmark. Digital camera maker Canon fell 3.5 percent after operating profit for October-December was 10 percent lower than a year earlier.
Komatsu jumped 3 percent to 2,520 yen after the construction machinery maker said its net profit in the nine months to Dec. 31 surged more than five times from a year earlier to 100.6 billion yen ($1.2 billion) on strong sales in China and other emerging markets.
Banks underperformed, Mitsubishi UFJ Financial Group fell 2.7 percent to 434 yen, Mizuho Financial Group dropped 2.4 percent percent to 160 yen and Sumitomo Mitsuo Financial Group shed 2 percent to 2,859 yen.
Seoul shares slipped on Friday, weighed down bydeclines in auto issues including Kia Motors, but Samsung Electronics lent support as its shares posted a record closing high despite weaker quarterly earnings.
The Korea Composite Stock Price Index finished down 0.34 percent at 2,107.87 points. Foreign investors were sellers of a net 171.7 billion won ($154.1 million) worth of stocks, snapping a three-session buying streak.
Shares in Samsung Electronics, the world's No.1 memory chip maker, rose 1.6 percent and posted a record closing high of 1,010,000 won despite reporting its weakest profit in six quarters.
Shares of semiconductor makers were also helped after data from DRAMeXchange, a semiconductor industry tracker, showed spot prices of key DRAM chips rose in an 8-10 percent range.
Shares in Hynix Semiconductor, the world's No.2 memory chip maker, jumped 5.4 percent.
But shares in Kia Motors fell 3.1 percent after posting quarterly results that missed market forecasts. Worries about a weaker yen hurting price competitiveness of South Korean firms and Japan receiving warnings from the IMF and rating agencies, also weighed.
Shares in Hyundai Motor, the country's No.1 automaker, lost 4.1 percent.
Australian stocks closed lower on Friday as mixed commodity prices and growing concern about the economic cost of severe floods in Queensland state fuelled negative sentiment.
The Australian market opened near flat after a positive lead from Wall Street but extended losses throughout the day as fears about rising inflation dragged most Asian bourses lower.
The Queensland government put the cost of recent flood damage to that state at A$5 billion on Friday, while some traders pointed to the impact of a government levy to fund flood damage as a potential downside for stocks.
Gold stocks fell as the spot price for the precious metal fell to a four month low. The largest Australian gold miner Newcrest ended 3.6 percent weaker.
Energy Resources Australia dived 12.9 percent to A$10.34 after suspending uranium processing at its Ranger mine in Australia's Northern Territory as a precautionary measure during the region's annual wet season.
China's Shanghai Composite ended 0.1 percent higher, as gains in small-caps offset weakness in property and financial issues.
Shanghai and Chongqing led China in introducing taxes for home buyers on Thursday, as the government's revved up its battle to curb record home prices and tame inflation.
Gemdale, the most active stock on the Shanghai market, dropped 0.3 percent. Shenzhen-listed China Vanke, the country's biggest developer, fell 0.5 percent.
Shares in consumer-oriented stocks and so-called "sunrise" industries such as automakers and science and technology firms outperformed. SAIC Motor rose 3.7 percent, while Guangdong Orient Zirconic Ind Sci & Tech was up 2.6 percent.
The benchmark Hang Seng Index closed down 0.7 percent, as property and energy counters weighed.
Offshore oil and gas producer CNOOC tumbled 7 percent as investors took the firm's conservative production forecast as an excuse to dump the stock.
In Southeast Asia markets traded in opposite directions, Singapore's Straits Times Index ended up 0.3 percent, while Malaysia's Kuala Lumpur Composite Index finished down 0.3 percent.
The FTSE CNBC Asia 100 index fell 0.6 percent.