Japan's Nikkei share average skidded to three-month lows on Friday, pressured by losses on Wall Street and a weaker dollar as doubts grow over whether President Donald Trump will be able to push through policies to boost US economic growth.

The Nikkei was down 1 per cent at 19,501.53 points by the end of morning trading, putting it on track to lose 1.2 per cent for the week.

US stocks sold off on Thursday, with the S&P 500 logging its biggest daily percentage drop in three months, as escalating worries about the Trump administration's ability to deliver on its economic promises rattled investors.

13 killed in Spain

An attack in Spain added to the risk-averse move, after a van mowed through crowds of tourists in Barcelona and killed at least 13 people, with Islamic State claiming responsibility.

Domestic concerns weighed as well. While Prime Minister Shinzo Abe's support rose this month after he reshuffled his cabinet, investors continue to gauge the impact of his support levels on Japan's currency.

“The signature trade on the back of Abenomics is shorting yen, and therefore, the fragility of the government is giving more reason for the yen to appreciate,” said Kyoya Okazawa, head of institutional clients, APAC at BNP Paribas Securities.

“People feel more yen appreciation pressure at this moment, and that is obviously putting pressure on the Nikkei.”

The dollar fell 0.2 per cent to 109.41 yen, extending its 0.6 per cent drop on Thursday.

“Earnings results season was okay, but geopolitical risk really cast a shadow over it, because the tension between the US and North Korea is a never-ending story,” which also bolstered the perceived safe-haven yen, Okazawa said.

Geopolitical tensions

While the fiery rhetoric between Washington and Pyongyang has calmed down, concerns remain that tension could again flare up on the Korean peninsula.

The United States and Japan will step up their defence cooperation to deal with the threat from nuclear-armed North Korea, officials from the two allies said on Thursday.

Banks and financial shares underperformed, with the banking subindex down 1.5 per cent, the insurance subindex losing 2.1 per cent, and the securities subindex 1.7 per cent lower at midday.

Mizuho Financial Group and Mitsubishi UFJ Financial Group the first- and second-most traded issues by volume, fell 1.1 per cent and 1.9 per cent, respectively.

The broader Topix was down 1 per cent at 1,598.23, poised to shed 1.2 per cent for the week, while the JPX-Nikkei Index 400 was also 1 per cent lower at 14,190.79, down 1.2 per cent for the week.

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