The 225-issue Nikkei Stock Average dropped 116.38 points, or 0.43 percent, from Thursday to close the day at 26,890.58.
The broader Topix index, meanwhile, lost 13.43 points, or 0.71 percent, to finish at 1,881.98.
Dealers here said that U.S. stocks came under pressure overnight as the Fed's aggressive rate hikes to tame inflation underscored concerns the U.S. economy could slip into a recession.
They added that the market here inherited this downbeat mood as U.S. dollar buying prompted by the Fed's stance saw the Japanese yen drop to a fresh 32-year low versus the dollar, near the mid-150 range.
"Investors were testing the dollar's upside slowly because they want to know if Japan will really intervene in the market, and at what level and under what conditions if it takes action," Sho Suzuki, a market analyst at Matsui Securities Co., was quoted as saying.
"There might be a view in the market that the U.S. unit will rebound even if it falls, and intervention can do little to reverse the dollar-buying and yen-selling trend," Suzuki said.
Other analysts suggested that while a weak yen can be a boon for Japanese exporters here as profits increase when repatriated from overseas, when the currency is low versus its major counterparts, procurement costs can spike.
By the close of play, land transportation, air transportation and nonferrous metal-linked issues comprised those that declined the most.
Air transportation issues that have been finding favor lately were sold for profits, with ANA Holdings and rival Japan Airlines both ending the day 2.1 percent lower.
Chip-related issues bucked the downward trend, helped by a rise in the Philadelphia SE Semiconductor Index and some solid earnings reports from IBM and Japan's semiconductor equipment maker Disco Corp.
As a result, Advantest added 1.9 percent, while Nikkei heavyweight Tokyo Electron climbed 4.6 percent.
On the Prime Market, falling issues outpaced rising ones by 1,422 to 350, while 65 ended the day unchanged, and 1,026.66 million shares changed hands, down from Thursday's volume of 1,044.53 million.
The turnover on the final trading day of the week came to 2,595.00 billion yen (17.20 billion U.S. dollars).
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