The Nikkei 225 fell 1.5 percent and was on track to end the week mostly flat. MSCI's broadest index of Asia-Pacific shares outside Japan was off 0.1 percent but was still set for a gain of 0.5 percent for the week.

Data showed household spending in Japan unexpectedly fell the fastest in nearly two years in October, as inflation ate into people's spending power. The yield on 10-year Japanese government bonds hit 1.94 percent early in Asia, its highest since mid-2007.

The benchmark yield was on track for a 13.5 basis point rise this week, marking the steepest five-day climb since March, but recent strong auction results suggested the cheap bond prices are drawing buyers into the market.

"In previous cycles, moves of that size would have rattled markets. Instead, demand strengthened," said Nigel Green, chief executive at deVere Group.

"Capital flows are shifting, long-standing expectations are being tested, and portfolios built around permanently cheap yen now face a very different world."

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The yen was last steady at 155 per dollar, well above its 10-month low of 157.9.

A quarter-point rate hike from the Bank of Japan later this month is now being priced at 75 percent, after Governor Kazuo Ueda told investors on Monday the central bank would weigh the "pros and cons" of raising interest rates.

Sources told Reuters that the Japanese government is prepared to tolerate a hike in December.

In other markets, stocks are mostly steady to end the week. Australia's resources-heavy shares were little changed. Hong Kong's Hang Seng index lost 0.5 percent, while South Korea's shares .KS11 climbed 0.7 percent.

In foreign exchange markets, the dollar steadied overnight after falling for nine straight sessions as traders awaited US inflation data that could sway a split Federal Reserve.

The dollar was off 0.1 percent on Friday to 99 against its major peers, and down 0.5 percent for the week.

The US personal consumption expenditures (PCE) price index for September is due later in the day - an outdated reading given the release has been delayed by the US government shutdown. Forecasts are centered on a 0.2 percent rise in the core measure, leaving the annual rate unchanged at 2.9 percent.

The US nonfarm payrolls report will not be released on Friday. Data on Thursday showed jobless claims dived last week, assuaging concerns of a sharp deterioration in the labor market, but that might be due to the Thanksgiving holiday.

Fed funds futures are pricing nearly a 90 percent chance of a cut next Wednesday. It could be the most contentious decision ever for the Federal Reserve. As many as five of the 12 voting members have publicly said they oppose cutting rates further.

"Tariffs have stalled the improvement in inflation this year, but we remain convinced the disinflationary framework is intact," said analysts at ANZ.

"That framework includes a softening labor market, moderating wage growth, well-anchored longer-term inflation expectations [...] We think the data will support an FOMC rate cut next week."

Treasury yields slipped a little on Friday after rising the previous day. Two-year Treasury yields slipped 1 basis point to 3.519 percent, having risen 5 basis points overnight, while the 10-year yield fell 2 bps to 4.092 percent, after gaining 5 bps overnight.

Brent crude futures were flat on Friday and were set to end the week largely unchanged.

Spot gold prices were set to finish the week 0.8 percent lower at $4,198 per ounce.

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