Tokyo stocks opened 0.64 percent lower on Monday after a rollercoaster week on Wall Street as investors focus on the looming "fiscal cliff" that threatens to drive the US economy back into recession.
The Nikkei 225 index at the Stock Exchange was down 56.32 points at 8,701.28 at the start.
"The stand-off over the fiscal cliff impasse is extending its paralysis to the stock market," said Hiroichi Nishi, general manager of equities at SMBC Nikko Securities.
"Japan stocks are being compressed between the overseas risk-off mood and extremely cheap valuations. Further falls from present levels will likely be progressively smaller," he told Dow Jones Newswires.
US stocks were slightly higher Friday after upbeat consumer confidence data took the edge off fears about the fiscal cliff, a combination of spending cuts and tax increases.
Market sentiment, battered after two days of heavy losses, was fragile and the Dow Jones Industrial Average closed up a mere 0.03 percent at 12,815.39.
Just before the market opening Monday, Japan's government announced the world's third largest economy shrank by 0.9 percent in the three months to September, logging the first contraction in three quarters.
The drop was in line with market expectations.
In currency trade the euro was little changed after the Greek parliament on Sunday adopted a 2013 budget including draconian cuts which the government has vowed will guarantee the release of foreign aid to stave off insolvency.
The euro bought $1.2729 in early Asian trade Monday, hardly changed from just before the Greek vote and slightly up from $1.2709 yen in New York late Friday.
Against the Japanese currency the euro edged up to 101.11 yen from 100.99 in US trade. The dollar was trading at 79.45 yen against 79.47 yen.