At least one person was killed and 32 were missing after the 6.7 magnitude quake paralysed the northern island, triggering landslides and knocking out power to its 5.3 million residents. A nuclear plant, which had been shut, lost power but no radiation incidents were reported.
Hokkaido Electric Power Co tumbled 6.4% after it said it conducted an emergency shutdown of all its fossil fuel-fired power plants following the quake. Tourism-related stocks were also under pressure, with travel agency operator HIS sliding 3.4%.
The Nikkei share average dropped 0.4% to 22,487.94, with overall sentiment also depressed by global trade tensions that have put a squeeze on world equities this summer.
The broader Topix fell 0.7% to 1,692.41. Declining issues outnumbered advancing ones 1,538 to 504.
“On top of a typhoon early this week hitting the Kansai region, the earthquake is stoking concerns of a possible fall in inbound tourism demand and potential damage to businesses,” said Shogo Maekawa, a global market strategist at JPMorgan Asset Management.
Japan began on Wednesday to clean up after typhoon Jebi killed 11 people, injured hundreds and stranded thousands at Kansai Airport, an important hub for companies exporting semiconductors in western Japan.
Nikkei Inc, the operator of the Nikkei benchmark index, also influenced trading with its announcement on changes. Copper smelter Furukawa Co dived 9.5% after the operator said that it will delete the stock from the index.
CyberAgent rose marginally by 0.2%, after Nikkei Inc. said it will add its stock to the index.
Nintendo Co and e-commerce business operator Start Today, which had been expected to be added, stumbled 3.6% and 7.2%, respectively, while Japan Exchange Group stumbled 5.3%.
On the other hand, brewer Takara Holdings jumped 16%, amusement park operator Tokyo Dome Corp surged 3.9%, Toho Zinc advanced 3%, as investors bought back after they had sold the shares on speculation that they would be removed from the index.
Companies which benefit from inbound tourism lost ground. Cosmetics makers Shiseido Co dropped 1.0% and Fancl Corp tanked 2.6%.