By Brad Frischkorn TOKYO--Tokyo stocks fell Friday after news that U.S. budget talks in Washington had stalled, sending the dollar lower and triggering selling in Toyota Motor, TDK, Nikon and other major exporters, even as foreign investors remained committed to real estate and other shares linked to monetary policy easing hopes. The Nikkei Stock Average closed down 99.27 points, or 1.0%, at 9940.06 following the prior session's 1.2% slide. For the week, the benchmark still managed a gain of almost 2.1%, and remains up nearly 18% year-to-date. The Topix index of all the Tokyo Stock Exchange First Section issues also fell 5.89 points, or 0.7%, to 832.72, with 24 of 33 subindexes ending in negative territory. Trading volume remained very heavy, totaling 3.6 billion shares, and topping the 3.4 billion share mark for the fourth session in a row, thanks largely to consistent overseas investor interest. The major indexes began bullishly, amid brighter signs of U.S. economic growth and a weaker yen. But Mid-morning news flashes that the U.S. House of Representatives will recess until after Christmas, apparently halting 'fiscal cliff' talks, slammed the door shut in the rally, however. The yen retraced ground lost overnight, leading to a broad pullback. "The market's knee-jerk reaction may not be cataclysmic," said CLSA equity analyst Nicholas Smith. "It merely means they're taking the discussions off-line for a huddle and starting again after Christmas. Contrary to popular belief, even if they drive the car over the fiscal cliff, the effects only trickle in during January, with a crescendo in following months. This can be fixed; they just mustn't dawdle." "This pullback may actually be healthy for the market, as it was technically overheated anyway," added an equity trader at a foreign brokerage, noting a soaring Topix advance/decline ratio, often interpreted as a sell signal. "Foreign investors continue to buy up the market, mainly on hopes that the incoming government will provide robust economic stimuli and move to accelerate monetary policy easing," said Yoshihiro Okumura, general manager at Chibagin Asset Management. Large-cap exporters, once bid higher, were hit severely by the midday surge in the yen. Toyota Motor lost 2.4% at Y3,785, TDK tumbled 3.4% to Y2,995, Nikon fell 2.3% to Y2,393, and Fanuc slipped 1.6% at Y14,830. Among inflation-sensitive financials, Nomura Holdings eked out a gain of 0.5% to Y431 after being chased earlier to as high as Y453, while Sumitomo Mitsui Financial Group ended flat at Y3,035. Retail lender Aiful lost 1.6% to Y436. Real estate shares managed to consolidate some of their early gains, with Mitsubishi Estate closing up 2.9% to Y1,897. The bullish real estate sector highlighted the performance of J-REIT Global Logistic Properties, or JLP, which made its TSE debut Friday. Shares ended at Y63,600, up 5.1% from their Y60,500 IPO price. The $1.3 billion offer was one if the biggest REIT IPOs in recent years, and heavily subscribed by foreign investors. The TSE REIT index also hit a new 2012 high, closing up 1.8%. March Nikkei 225 futures fell 70 points, or 0.7%, at 9960 on the Osaka Securities Exchange. Write to Bradford Frischkorn at bradford.frischkorn@dowjones.com

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