Tokyo shares end lower on Korean tension, euro worries

The Nikkei index at the Tokyo Stock Exchange fell 85.08 points to close at 10,030.11, trimming losses made in early trade.

The Topix index of all first section shares fell 1.02 per cent or 8.91 points to 866.57.

North Korea's artillery attack on a South Korean island worried investors, although many players remained hopeful that the international community would calmly deal with the issue.

"Since Japan is close to the Korean peninsula, investors may seek to avoid taking risks," Hiroichi Nishi, general manager at Nikko Cordial Securities, told Dow Jones Newswires.

Analysts said selling in Japan seemed relatively modest despite the double whammy of tensions in the Korean peninsula and a weaker euro.

"It looks like the geopolitical risk from the North Korean problem will not drag on for too long, so markets are reacting relatively calmly," said Takashi Ushio, general manager at Marusan Securities.

Meanwhile, exporters fell on continuing concerns that Ireland's debt problems may spill over to other eurozone countries.

Dublin applied for help on Sunday from the European Union and International Monetary Fund to cope with a gaping budget deficit and a deeply troubled banking system.

The move prompted Standard & Poor's to lower its credit ratings for Ireland, which was largely expected.

"There is no doubt that the European problem remains intact," said Masayoshi Yano, senior market analyst at Meiwa Securities.

Shares with exposure to eurozone markets were hurt.

Electronics maker Sony fell 2.08 per cent to 2,871 yen, precision equipment firm Nikon skidded 2.89 per cent to 1,679, and automaker Mazda fell 1.68 per cent to 233.

But trading house Sojitz soared 9.09 per cent to 168 on reports that it has agreed to obtain the right to buy about 8,500 tonnes of rare earth metals from Australia's Lynas Corp.

The amount would represent nearly 30 per cent of annual demand in Japan, which suffered a serious supply shortage of the minerals used in products from flat-screen TVs to hybrid cars after China stopped exports amid a tense diplomatic row.

Sojitz and Lynas said in a joint statement released after the closing bell that they "will investigate a long-term supply agreement to supply more than 9,000 tonnes per year" over 10 years.