Tokyo shares drift lower as yen surges

Tokyo stocks gave up earlier gains and ended lower on Friday as the yen surged and weighed on exporters.

The benchmark Nikkei 225 index ended down 0.05 percent, or 13.84 points, at 27,801.64, while the broader Topix index gave up 0.44 percent, or 8.54 points, to 1,940.31.

The dollar slipped 132.95 yen, against 134.25 yen in New York on Thursday, after fresh data showed that the US economy had contracted again.

Despite recession fears for the US economy, some investors took the latest news positively, speculating that the US Federal Reserve may slow its rate hikes.

"The market advanced in the morning session with buying seen among growth stocks while the US yields fell," Daiwa Securities said in commentary.

"But the yen turned higher against the dollar in the afternoon and fuelled worries that the benefit of the lower yen that has long supported the market might soon fade," the brokerage said. 

"Investors returned to selling, particularly exporters," Daiwa added. 

Overnight, US GDP data showed the world's biggest economy shrank for a second straight quarter between April and June. 

"The US economy is weakening much faster than anyone expected," Edward Moya, a senior market analyst at OANDA, said in a note. 

"This second-straight contraction will complicate the Fed's plan to aggressively fight inflation," Moya said. 

Meanwhile, Japan's unemployment rate for June remained flat at 2.6 percent, according to figures released by the internal affairs ministry Friday.