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Hong Kong - Asian markets were mixed on Thursday as attention turned to another stand-off in Washington over the US budget that could see parts of the government shut down if a deal is not agreed within days.
Earlier losses in Tokyo were reversed as traders were cheered by a report that Japan's government was planning to cut corporation taxes to negate the blow of an expected sales tax hike.
The Nikkei rose 1.22%, or 178.59 points, to 14 799.12 - having sunk more than 1% one point in the morning - as the dollar surged against the yen.
Sydney added 0.35%, or 18.6 points, to 5 294.5 and Seoul rose 0.46%, or 9.26 points, to end at 2 007.32.
However, Shanghai fell 1.94%, or 42.71 points, to 2 155.81 and Hong Kong lost 0.36%, or 84.60 points, to 23 125.03.
Republicans and Democrats have until midnight on Monday to agree a budget package to fund the government. If a deal is not reached some federal agencies will shut down from Tuesday, and hundreds of thousands of workers will be sent home.
Adding to investors fears is Republicans' refusal to agree to lift the US debt ceiling from $16.7trn - which must be achieved by mid-October - unless there are cuts to President Barack Obama's health care law in the budget.
"It's very difficult for the market to go up from here with all the shenanigans in Washington," said Mace Blicksilver, director at Marblehead Asset Management.
On Wall Street, the Dow fell 0.40%, the S&P 500 dipped 0.27% and the Nasdaq declined 0.19%.
Traders fear a repeat of the 2011 gridlock in Washington that saw lawmakers take debt ceiling negotiations to the wire, but not before global markets were sent tumbling. The face-off led to the historic downgrade of the country's AAA debt rating by Standard & Poor's.
The dollar sank in New York on the budget uncertainty and following some underwhelming economic data that suggest the economy is not yet strong enough for the Federal Reserve to start winding down its stimulus programme.
In New York the greenback late Wednesday sat at ¥98.46.
However, on Thursday afternoon it jumped to ¥99.02 after Japan's Kyodo news agency said Tokyo was considering the business levy cut. The move is intended to allay fears that the flagged rise in the sales levy - to 8.0% from 5.0% - would hurt the country's recent economic revival.
A dealer at a major Japanese bank told AFP that while the latest news is not new, the key point is the fact the government is going to confirm it is a consideration.
The euro fetched $1.3515 and ¥133.67 Thursday against $1.3522 and ¥133.18 in New York.
On oil markets, New York's main contract, West Texas Intermediate for delivery in November, was up two cents at $102.68, while Brent North Sea crude for November eased 12 cents to $108.20.
Gold cost $1 337.95 at 10:10 compared with $1 320.56 on Wednesday.
In other markets:
-- Taipei fell 1.20%, or 99.22 points, to 8 184.68.
Hon Hai fell 1.3% to Tw$75.8 while smartphone maker HTC was 0.74% lower at Tw$134.0.
-- Wellington was flat, edging up 0.75 points to 4 765.47.
Telecom added 0.86% to NZ$2.34 and Contact Energy gained 1.89% to NZ$5.40.
-- Manila eased 0.20%, or 12.96 points, to 6 407.46.
Alliance Global fell 0.97% to 25.55 pesos and Metropolitan Bank and Trust shed 0.61% to 89.10 pesos but Philippine Long Distance Telephone rose 0.41% to 2 968 pesos.
