Elsewhere around the region, markets ended mixed. Australia's leading index fell on weakness in mining shares, while Singapore finished at another record.

The Bank of Japan announced it would keep interest rates unchanged at 0.25%, saying economic and financial conditions did not warrant a move at this time. In its November report on the economy, the central bank left its assessment unchanged from October, saying the No. 2 global economy's "expanding moderately."

In a news conference after the close of trading, Bank of Japan Governor Toshihiko Fukui reiterated his optimistic outlook that the economic expansion should continue. He cited the U.S. housing market and its impact upon private consumption as factors to watch in assessing the outlook for the U.S. economy and in assessing the Bank of Japan's monetary policy, according to a report by Dow Jones Newswires.

Tokyo's Nikkei 225 Average (JP:1804610: news, chart, profile) ended the session 0.5% lower at 16,163.87. The broader Topix index fell 0.6% to 1,582.04.

Meanwhile, Hong Kong's blue-chip Hang Seng Index rose 0.3% to 19,154.07, extending its record run after closing above the 19,000-level for the first time on Wednesday. Turnover was robust at HK$57.53 billion.

The China Enterprises Index, Hong Kong's benchmark for China shares, rose 0.9% to 8,312.41. The index's all-time high is 9,452.86, set on Dec. 19, 1993.

"I think the market is expecting that an interest-rate hike will be earlier than expected, and that is putting some pressure on stock prices in Japan," said Hirokazu Yuihama, a strategist with the Daiwa Institute of Research.

He added that regional markets outside Japan were overdue for a correction but that the overall trend was bullish. The Hang Seng could rise another 10% by the end of the first half of 2007, Yuihama said.

Elsewhere around the region, Australia's S&P/ASX 200 ended 0.7% lower at 5,392.60, New Zealand's NZX-50 Index fell 0.5%, Indonesia's JSX Composite lost 0.1% and South Korea's Kospi eased 0.1%.

Malaysia's KLSE Composite rose 0.9%, Taiwan's Weighted Price Index added 0.3%, Singapore's Straits Times Index gained 0.8%, Shanghai's Composite Index rose 1% and India's benchmark 30-stock Sensitive index moved 0.3% higher.

Analysts said trading in Hong Kong was dominated by institutional investors building positions in Chinese financial stocks.