The 225-issue Nikkei average shed 99.48 points to close at 12,752.21, slumping to the lowest finish since April 1. On Wednesday, the key market gauge dropped 13.36 points.

The TOPIX index of all first-section issues ended off 8.84 points at 1,224.53, after losing 2.17 points the previous day.

"Uncertainty about the U.S. financial industry is so strong that it is hard to find the courage to buy stocks at present," Hideyuki Suzuki, senior analyst at Morningstar Japan K.K., said.

Market participants dread the increasing likelihood of a U.S. government bailout of mortgage financiers Fannie Mae and Freddie Mac, because such a move is expected to inflict heavy damages on U.S. finances, he said.

"There seems to be no light at the end of the tunnel in terms of U.S. financial jitters," Suzuki said.

The dollar's drop against the yen and rebounding prices of crude oil and other commodity products put an additional damper on investor sentiment, brokers said.(MORE)Tokyo Stocks End Down for 3rd Day on Financial Jitters

The Nikkei showed some resilience at lows on rounds of bargain hunting, but in the end, the index slipped below its near-term closing low of 12,754 marked on July 15.

Losers led gainers 1,106 to 486 on the TSE's first section, while 118 issues ended unchanged.

Volume came to 1,575 million shares, down from Wednesday's 1,633 million shares.

Brokers agreed that the recent lackluster turnover is a sheer reflection of a loss of appetite among many domestic individual investors.

Tsuyoshi Segawa, equity strategist at Shinko Securities Co., said that more and more of such investors are opting to shed their shareholdings not only due to the Japanese economy's dimming outlook but also because of the planned securities tax reform next January.

Although the government is believed to be considering a new type of tax breaks to mitigate the impact of tax rate changes, Segawa said that investors are being discouraged by the new requirement to file for income tax returns if their capital gains exceed a certain level, whereas tax is currently withheld from income at source.

The coming tax change, coupled with the need to deposit share certificates into an electronic system to be introduced also in January, appear to be causing investors to cash out at least for the time being, Segawa said.(MORE)Tokyo Stocks End Down for 3rd Day on Financial Jitters

Export-related technology and auto issues suffered losses, with investor sentiment hurt by a steady fall in U.S.-bound exports as indicated in the July trade statistics released Thursday. Major losers included Toyota, Sony and TDK.

Brokerage houses such as Nomura and Daiwa met with selling due to the recent drop in stock market turnover.

Trading houses, by contrast, romped ahead following commodity prices' rises. Among them were Mitsubishi and Mitsui.

Nippon Denko went limit-up after the metal and chemical products maker on Wednesday reported hefty profit growth for the January- June first half.

In index futures trading on the Osaka Securities Exchange, the key September contract on the Nikkei average finished down 110 points at 12,750.END

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