Tokyo stocks down in early trade

TOKYO, Japan -- Tokyo stocks drooped in early trade on Friday, led by expensive technology stocks and banking shares.

This followed steep falls on Wall Street and growing concerns over Japan's fragile economy.

The benchmark Nikkei 225 average was down 208.94 points or 1.63 percent to 12,637.72 by mid-morning, while the broader TOPIX index dipped 16.64 points or 1.3 percent to 1,255.19.

High-tech bellwether Sony Corp slipped 1.69 percent to 8,700 yen.

Australia, Korea, NZ all weaker

Elsewhere in the region, markets in Australia, Korea and New Zealand also opened weaker, but Taiwan was a little stronger.

VIDEO Lian Pek with the Asian market update. Play video (QuickTime, Real or Windows Media)

Australia's benchmark S&P/ASX200 was off 21.0 points or 0.6 percent on continuing weakness among telco stocks and bluechips such as BHP and News Corp.

Korea's Kospi was 6.38 points lower at 607.37.

"Uncertainty has dominated the market recently. But conditions seem to be darkening given a rise in bankruptcies and a further downgrading of the government's economic assessment," said Hiroichi Nishi, general manager of Nikko Securities' products group.

On Thursday, the Japanese government downgraded its assessment for a fifth consecutive month and broke new ground by saying the world's second-largest economy was deteriorating.

Bankruptcy cases on the rise

Meanwhile, the number of bankruptcy cases grew 12.8 percent in May from a year earlier to 1,724 -- the fourth-highest total for the month in the postwar era, according to private research firm Teikoku Databank.

Investor sentiment had already been dampened by worse-than-expected data on Monday showing Japan's gross domestic product contracted 0.2 percent in the January-March quarter.

But traders said a worsening in economic conditions has partly been discounted already and that the market's bottom may be supported by hopes for a further quantitative credit easing by the Bank of Japan.

The central bank is due to announce results of its two-day policy-setting meeting later on Friday.

Top optic fibre maker Furukawa Electric Co Ltd plunged 6.76 percent to 1,021 yen after U.S. telecommunications stocks continued their slide on Nokia Corp's surprise profit warning on Tuesday.

Bank sector still hurt by bad loans

The banking sector continued to be hurt by persistent worries regarding the banks' mountain of bad loans and their bottom lines. Mizuho Holdings, the world's biggest banking group by assets, lost 2.52 percent to 502,000 yen.

The Nihon Keizai Shimbun business daily reported on Friday that Japan's 15 major banks are poised to sell 3.7 trillion yen in their shareholdings for the current business year to next March, some 600 billion yen more than a year earlier.

Reuters contributed to this report.