Japan's Nikkei stock average lost 0.6 percent on Friday to end the week down, bruised by U.S. jobs data that dented hopes of economic recovery and dragged down by retailers after Seven & I tumbled on poor results. Oil-linked shares fared badly after oil extended losses towards $66, while drugmaker Eisai Co Ltd fell after a brokerage downgrade. The benchmark Nikkei lost 60.08 points to 9,816.07 points in thin trade and fell 0.6 percent on the week, as investor energy waned late in the day with Wall Street closed for a holiday.

U.S. shares fell on Thursday after the U.S. Labor Department reported that U.S. employers cut 467,000 jobs in June, 100,000 more than Wall Street economists had expected. The unemployment rate hit 9.5 percent, the highest in nearly 26 years.

Tokyo analysts said the Nikkei's retreat was more muted than that of U.S. shares because the vacation-shortened trading week on Wall St had thinned trade and exaggerated moves, with some suggesting that perhaps the market there had expected too much.

"Up until now most of the indicators appeared to be mostly on a rising trend, but this jobs data shows the recovery seems to be dragging its feet," said Hiroaki Osakabe, a fund manager at Chibagin Asset Management.

"I don't think the long-term recovery trend has changed but these figures do seem to suggest it will take time."

Others said that bargain-hunting emerged in Tokyo as the day wore on and the surprise of the jobs data wore off, noting that activity centred around day-traders.

The Nikkei dipped below its 25-day moving average for most of the day but crawled higher to close at just about the same level.

The 25-day moving average now comes in at 9,818.36 and a move below it is often viewed as a signal of weakness ahead. The Nikkei's 14-day moving average also broke below the 25-day moving average, a move known as the "Death Cross" that has in the past signalled downturns.

But while some analysts said the technical picture was not particularly encouraging, others were more optimistic.

Nagayuki Yamagishi, a strategist at Mitsubishi UFJ Securities, said the Nikkei seems unlikely to fall too sharply, since the 25-day moving average is still sloping upwards, which is a positive sign.

The Nikkei managed to crawl back above 10,000 several times during the week before being beaten back down by profit-taking. The broader Topix closed down 0.4 percent at 920.62.

RETAILERS RATTLED

Seven & I Holdings fell 5 percent to 2,190 yen after it booked a sharper-than-expected decline in quarterly profit as Japan's recession hit sales at its supermarkets and department stores.

Kicking off the current earnings season, Japan's largest retailer said operating profit fell 17.5 percent for its first quarter ended in May -- a result which also sent other retail stocks such as rival Aeon tumbling.

"It's negative as we had expected a single digit profit decline," Kazunori Tsuda, an analyst at Daiwa Institute of Research, wrote in a note to clients.

Aeon lost 4.4 percent to 895 yen and department store operator Isetan Mitukoshi fell 4.9 percent to 950 yen.

Even Fast Retailing, whose Uniqlo chain of discount stores saw a gain of 6.4 percent in same-store sales for June, dropped 2.9 percent to 12,050 yen.

Drugmaker Eisai lost 4.6 percent to 3,310 yen after Nikko Citigroup downgraded it to "3M" (sell/medium risk) from "1M" (buy/medium risk), citing the fact that the company's Aricept Alzheimer's drug will not receive approval from the U.S. Food and Drug Administration for pediatric use and will not get a six-month extension from its patent expiry date.

Eisai said on Thursday that it had received a notice from the FDA that there were insufficient grounds to issue a Written Request to obtain pediatric exclusivity, which Nikko Citigroup analyst Hidemaru Yamaguchi termed a negative surprise and said had forced them to trim their forecasts.

Oil-linked shares slid, with oil and gas field developer Inpex down 1.6 percent to 735,000 yen, distributor Nippon Oil dropping 2 percent to 529 yen and fellow distributor Showa Shell Sekiyu shedding 1.4 percent to 990 yen.

Trade was light, with 1.9 billion shares changing hands on the Tokyo exchange's first section, down from last week's daily average of 2.2 billion shares.

Declining shares outnumbered advancers by roughly 2 to 1.