TOKYO -- Japanese shares closed lower as futures traders shuffled positions ahead of the settlement of September futures and options contracts on Friday. However, with most cash stock buyers out of the market until the volatility in futures trading subsides, the market was relatively quiet.

The

Nikkei 225

index shed 235.94, or 1.4%, to close at 16,452.27, while the

Topix

index, which includes all shares listed on the

Tokyo Stock Exchange's

first section, lost 11.36 to finish at 1491.04. The

Jasdaq

small-cap index fell 1.37, or 1.7%, to end the day at 81.01, while the Nikkei

over-the-counter

market lost 16.54, or 1.0%, to close at 1704.91.

Traders reckon trading in the futures market will dominate until Thursday, as players adjust positions before derivatives contracts expire, which is dubbed the

settlement of special quotations

. September Nikkei 225 futures fell 340.00 to 16,400, while September Topix futures fell 16.00 to 1485.

With most institutional and retail investors waiting for the futures' market volatility to settle, the only thing the cash market saw was some unwinding in cross-shareholdings in selected bank shares. The

Industrial Bank of Japan

lost 6 yen to 729 ($6.86), while the

Bank of Tokyo Mitsubishi

(MBK)

shed 1 to 1343.

Most large-cap tech shares were flat to lower, including

Toshiba

, down 40, or 3.9%, to 999. Despite announcing a two-for-one stock split, shares of

Yahoo! Japan

shed 900,000, or 3.0%, to 29.3 million. Some traders thought supply may exceed demand after the split, which is scheduled for Sept. 29.

On the upside,

NTT DoCoMo

, which recently announced a deal with the U.S.'

Palm

(PALM)

to introduce new products in Japan, rose 30,000, or 1.0%, to 2.92 million.

In lethargic trading, the greenback gained against the yen to recently buy 106.23.

After rising nearly 600 points over the last two sessions, Hong Kong's

Hang Seng

took a break and fell 130.95 to close at 17,595.22. Property shares, which had been on the rise over the past week, led the decline, with

Sun Hung Kai Properties

shedding HK$1.00, or 1.3%, to 78.75 ($10.10), while

Cheung Kong

fell 1.00, or 1.0%, to 104.50.

Investors instead switched into telecom shares like

China Mobile

(CHL) - Get Report

, which rose 0.75, or 1.2%, to 62.50, while

Smartone Telecommunications

jumped 0.85, or 5.3%, to 16.85.

Elsewhere in Asia, Korea's

Kospi

index fell 2.06 to close at 679.24, while Taiwan's

TWSE

index shed 17.40 to end trade at 7785.62.