(Sharecast News) - Asia-Pacific equity markets ended mostly lower on Friday, mirroring weakness on Wall Street, where two of the three major indices slipped overnight.
Despite a strong showing in Japan, losses across China, Hong Kong, South Korea, Australia and New Zealand dragged the broader regional picture into negative territory.
Patrick Munnelly, market strategy partner at TickMil, said Japanese stocks rose as indications of reduced trade tensions with the US and positive tech earnings improved market sentiment.
"The Nikkei 225 index climbed ... following comments from Japan's trade negotiator that the US had agreed to eliminate the stacking of universal tariffs and reduce car duties.
"Shares of SoftBank and Sony rose after reporting earnings.
"Asian stocks are set for their strongest week since June, fuelled by mounting speculation regarding a potential interest rate cut by the Federal Reserve, despite ongoing tariff-related volatility."
Munnelly said US president Donald Trump intensified tensions with his recent trade moves, targeting India and imposing a 39% tax on Swiss exports to the US, while saying he was "very close to a deal" with China.
"The US government confirmed it would abolish the stacking rule on tariffs for Japan and reduce automotive levies, as stated by Tokyo's chief trade negotiator Akazawa after a Thursday meeting with his US counterparts.
"US officials expressed disappointment that the stacking rule had been enforced against Japan despite a verbal agreement and pledged to reimburse any excess levies paid.
"Akazawa noted that no timeline was established for when these changes would take effect."
Stocks mostly fall despite rally in Japan and SoftBank surge
Japan was the region's clear outperformer, with the Nikkei 225 jumping 1.91% to 41,843.00 and the broader Topix index rising 1.21% to close at 3,024.21, crossing the 3,000 mark for the first time.
Shares of SoftBank Group soared 10.39%, hitting a record high earlier in the session before settling lower.
The investment giant reported a first-quarter profit of JPY 421.8bn, far surpassing the LSEG consensus of JPY 127.6bn.
It also posted a JPY 4.8bn gain in its Vision Funds, the largest since June 2021.
Other notable gainers included Terumo, up 8.12%, and Nitori Holdings, which rose 6.98%.
Toyota Motor climbed 3.47% despite a 37% drop in quarterly net income and a downgrade to its full-year operating income forecast by JPY 600bn, to JPY 3.2trn.
Chinese markets edged lower, with the Shanghai Composite down 0.12% at 3,635.13 and the Shenzhen Component falling 0.26% to 11,128.67.
Declines were led by Perfect Group, which slumped 10.01%, followed by Yonyou Network Technology and Nancal Energy-Saving Technology, which dropped 8.74% and 7.35%, respectively.
In Hong Kong, the Hang Seng Index lost 0.89% to close at 24,858.82, weighed down by a sharp 8.19% drop in SMIC and losses of more than 8% in Wharf Real Estate Investment.
Zhongsheng Group also fell 3.61%.
South Korea's Kospi 100 shed 0.41% to finish at 3,240.96.
Defence firm LIG Nex1 plunged 14.93%, while Netmarble Games and Hanwha Systems declined 10.18% and 6.88%, respectively.
The S&P/ASX 200 in Australia slipped 0.28% to 8,807.10, with QBE Insurance Group tumbling 8.78%.
Platinum Asset Management and Austal dropped 3.95% and 3.61%, respectively.
Across the Tasman Sea, New Zealand's S&P/NZX 50 index fell 0.33% to 12,844.63.
Synlait Milk led losses with a 6.45% fall, followed by declines in Eroad, down 2.99%, and Oceania Healthcare, off 2.94%.
In currency markets, the dollar was last up 0.36% on the yen to trade at JPY 147.67, as it gained 0.07% against the Aussie to AUD 1.5340, and climbed 0.1% on the Kiwi to NZD 1.6791.
Oil prices were modestly higher, with Brent crude futures last up 0.18% on ICE at $66.55 per barrel, and the NYMEX quote for West Texas Intermediate adding 0.13% to $63.96.
Japan's consumer spending falters as inflation and tariffs weigh on outlook
In economic news, Japan's household spending grew at a slower-than-expected pace in June, highlighting persistent weakness in consumer demand despite elevated inflation and record wage settlements.
According to figures from the Ministry of Internal Affairs and Communications, household spending rose 1.3% year-on-year in June, falling well short of the 2.6% consensus forecast and sharply down from May's 4.7% gain.
On a seasonally adjusted monthly basis, spending slumped 5.2% - the steepest drop since January 2021 and worse than economists' forecast for a 3% decline.
A key drag came from food purchases, which fell 2.1% from a year earlier, marking the first annual decline in three months.
Rice consumption dropped 12.1%, the fastest rate of decline since May 2022, as price hikes led consumers to cut back or switch to cheaper alternatives.
The subdued spending figures followed signs of continued strain on real incomes.
Despite Japanese firms agreeing to raise wages by an average of 5.25% this year - the largest increase in 34 years - real wages declined for a sixth consecutive month in June, as inflation continued to erode purchasing power.
Consumer behaviour and wage trends remained central to the Bank of Japan's decision-making on interest rates.
Although core inflation has remained above the central bank's 2% target for more than three years, a sustainable recovery in consumption was yet to materialise.
On Thursday, the government downgraded its growth forecast for the current financial year, citing the impact of US tariffs on Japanese exports and investment, as well as pressure on domestic consumption from rising prices.
Reporting by Josh White for Sharecast.com.
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