TOKYO -- High-tech shares took a beating despite news overnight that

second-quarter earnings at

Yahoo!

(YHOO)

beat analyst's expectations as interest-rate jitters and the settlement of options and futures contracts on Friday hurt sentiment in Tokyo today.

In addition, key tech stocks, including

Softbank

, which owns 22.58% of Yahoo!, fell as investors tried to cut the losses they amassed six months ago when they bought Softbank shares on margin, traders said.

The

Nikkei 225

index shed 162.23 to 17,342.13, while the

Topix

index, which includes all shares listed on the

Tokyo Stock Exchange's

first section, lost 6.56 to 1604.40. The

Jasdaq

small-cap index dipped 1.44, or 1.6%, to 86.23, while the Nikkei

over-the-counter

index fell 8.81 to 1784.16.

Trading was slow with the

Bank of Japan's

policy board meeting coming up on Monday, where bankers are expected to resume the heated debate over whether to abolish Japan's zero interest rate policy or not.. In addition, Nikkei 225 futures got hit by a large lot sale in the middle of the day, which dragged the cash market lower as well. The sale was pegged to position adjustments ahead of Friday's options settlement.

The sole, but large, incentive to trade higher was the earnings news about Yahoo! but investors who had bought large-cap tech shares on margin at the top of the year were scrambling to shed their positions to cut any more losses. Traders said there were many investors who were hurting since buying Softbank at its February peak of 66,000 yen ($615.90). Softbank dropped 480 yen, or 4.0%, to 11,630 ($108.53) today, while

Yahoo! Japan

lost 3.4 million, or 9.1%, to 33.8 million.

Other tech names also dipped lower, including

Sony

(SNE) - Get Report

, down 80 to 10,820, and

Fujitsu

, down 80, or 2.3%, to 3370.

After poisoning more than 14,000 people with tainted milk,

Snow Brand Milk Products

shed 24, or 5.9%, to 382. The firm said it would voluntarily shut down 21 milk processing plants to check on faulty machinery and to conduct a thorough cleaning.

With rumors that

Standard & Poor's

may be ready to cut Japan's sovereign debt rating, the greenback edged slightly higher to 107.16 yen. The talk started when dealers got ahead of themselves after hearing S&P intended to hold a press conference on the general state of affairs, but the topic of sovereign debt did not come up.

Hong Kong's

Hang Seng

index edged up 192.60, or 1.1%, to 17,552.26 largely on the back of huge gains in index heavyweight

Hutchison Whampoa

. Shares climbed HK$5.00, or 4.5%, to 115.50 ($14.82) as traders got excited over the likelihood that the firm would announce it was selling a stake in its U.K. mobile phone unit to Japan's

NTT DoCoMo

and Dutch

KPN

today. In addition, Hutchison owns 23% of

VoiceStream Wireless

(VSTR)

, which was written up by the press yesterday as a possible

buy-out candidate for Germany's

Deutsche Telekom

(DT) - Get Report

.

With the ongoing bankers' strike not seriously affecting daily business in Seoul, Korea's

Kospi

index rose 2.90 to 839.76, while Taiwan's

TWSE

index dropped 98.88, or 1.2%, to 8059.75.