Japan's Nikkei average fell 1.6 percent on Friday, hit by negative earnings surprises from

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firms such as chip equipment maker Advantest Corp and a stronger yen that pressured shares of exporters.

Market sentiment continued to be hurt by Nippon Steel Corp's warning of a first annual net loss in seven years, with shares in the world's second-biggest steelmaker extending losses for a second day.

"Good earnings have already been factored in and investors are now instead sharply reacting to negative surprises such as cuts in earnings outlooks," said Hiroaki Kuramochi, chief equity marketing officer at Tokai Tokyo Securities.

"Uncertainty about the outlook for the U.S. economy and a stronger yen are also something of a double whammy for the Japanese market." The benchmark Nikkei fell 162.13 points to 10,252.16. It rose 1.6 percent the previous day to end a four-day losing streak. The broader Topix declined 0.9 percent to 906.03.

Toyota Motor Corp was flat by the midday break. The stock earlier slid more than 2 percent after the world's top automaker said it would extend to Europe and China a recall of millions of vehicles due to faulty accelerator pedals and floor mats.

Toyota's stock has tumbled 15 percent in the past week on its recall woes. Advantest, which supplies chip testers to chip makers such as Intel, lost 8.6 percent to 2,294 yen after saying it now expects an annual net loss of 13.5 billion yen ($150 million), missing the market consensus for a loss of 7.2 billion yen by 16 analysts. Nippon Steel shed 1.5 percent to 329 yen, after falling nearly 4 percent the previous day.

The dollar fell 0.2 percent against the yen to 89.75 yen in early Asia trade. Investors fret about a stronger yen as it eats into exporters' profits when they are repatriated.

Digital camera maker Canon Inc shed 3.3 percent to 3,560 yen and Honda Motor Co slipped 0.5 percent to 3,125 yen.

But Omron jumped 7.1 percent to 1,818 yen after the maker of computer systems products on Thursday hiked its operating profit forecast for the year ending in March to 10 billion yen, up 87.3 percent from a year earlier.

U.S. stocks dropped on Thursday partly as poor outlooks from Motorola and Qualcomm dented optimism in the technology sector.