TOKYO -- As badly as a 7% fall on

Nasdaq

might have affected Asia's markets, investors in Japanese technology and Internet shares are holding back ahead of the upcoming earnings season.

Just as U.S. investors have been rethinking the likelihood of profits for Net plays, Japanese investors are taking another look at Net stocks that have been falling out of favor since last month. The wait to see whether the sector will change direction will probably continue for the next two weeks or so, when many Net and tech firms start announcing earnings for the year ended March 31.

The key

Nikkei 225

index fell 306.79 points, or 1.5%, to 20,526.42, while the

Topix

index, which includes all shares listed on the

Tokyo Stock Exchange's

first section, shed 42.32, or 2.5%, to 1664.02. The

Jasdaq

small-cap index slipped 4.33, or 4.4%, to 93.74, while the Nikkei

over-the-counter

index rose 0.28 to 2057.80.

News of a bankruptcy filing Wednesday by one of

Hikari Tsushin's

largest phone distributors contributed to a weak tech sector, as Hikari's shares remained ask-only at 36,800 yen. (The TSE halts the trading of shares when bids and offers don't roughly match.)

Softbank

, despite announcing a 3-for-1 stock split effective June 30, fell 5000, or 7.0%, to 66,300. Both firms have cut earnings projections from those released earlier, and should come out with earnings reports in the next few weeks. Electronic component makers such as

Sony

(SNE) - Get Report

and

Canon

(CANNY)

were down 4.7% and 4.9%, respectively.

Although buying in many blue chips tapered off today, airline and real estate shares were slightly higher.

Japan Airlines

rose 2 to 346 after announcing plans to enable

NTT DoCoMo

(JAPNY)

mobile phone users to gain access to its flight information and other services.

Sekisui House

, up 18, or 1.7%, to 1080, was picked up by fund managers who were confident that the economy would turn around, as forecast by up an upbeat economic report from the

Bank of Japan

Wednesday.

Besides the performance of U.S. equities, however, comments from BOJ governor

Masaru Hayami

had a some traders worried. Hayami, in a press conference after the market closed Wednesday, said the current near-zero interest rate policy would not be kept for much longer. His comments come at a strange time, traders said, since the Japanese government is expected to tell its

Group of Seven

counterparts during the upcoming meeting in Washington that the central bank will maintain its current policy with the intention of keeping the market awash with cash.

The greenback slid against the yen in early European trading Wednesday on Hayami's remarks, but after some short-covering the dollar was at 105.83 yen.

"(Hayami) will certainly endure heat from the politicians in the weeks ahead, and he may well find himself out of a job this year as a result of his lack of team play," said strategist Tim Kerans at

Barclays Capital

. Most experts believe the BOJ won't hike rates until the end of the year, and they say the governor's comments were designed to give the market an early warning that the current low-rates policy was bound to end at some point.

Hong Kong's

Hang Seng

index dropped 224.53 points, or 1.4%, to 16,352.56 due to a cut in profits from index heavyweight

China Telecom

(CHL) - Get Report

. The firm said profits in 1999 declined 30% due to a bigger-than-expected write-off in old network equipment. However, short-covering left shares up HK$0.50 to 63.00 since the cut in profits were expected to some extent, traders said. Shares in

Pacific Century CyberWorks

rose 7% to 16.50, as they resumed trading for the first time since the announcement by Australian phone company

Telstra

(TLS)

that it would invest $3 billion in PCCW and the target of Pacific Century's pending takeover attempt,

Cable & Wireless HKT.

(HKT)

Pacific Century has given HKT shareholders a choice of an all-stock deal or a combination of stock and cash. Prices of both PCCW and HKT have fallen sharply since the deal was struck on February 29. While both stocks have rallied on the news of the Telstra deal, which would help PCCW finance a $12 billion loan needed to complete the transaction, neither has returned to its weekly high. HKT fell 5.8% today, to 19.55.

South Korean

markets were closed today due to national elections.