Tokyo stocks slipped 0.40 percent Tuesday morning on profit-taking as investors weighed a solid yen against a record close on Wall Street.
The Nikkei 225 index at the Tokyo Stock Exchange fell 62.37 points to 15,550.88 by the break, while the Topix index of all first-section issues was down 0.22 percent, or 2.89 points, at 1,288.42.
"The dollar fell (against the yen) and futures are trading below yesterday's finish, leaving the market ripe for profit-taking," said Hiroichi Nishi, general manager of equities at SMBC Nikko Securities.
The dollar was at 103.84 yen in midday Tokyo trade, down from 104.01 yen in New York Monday afternoon as the greenback's recent rally in anticipation of higher US interest rates ran out of steam. The US unit touch a seven-month high around 104.20 yen in Tokyo Monday.
A strong yen tends to drag down Japanese stocks as it works against exporters, making them less competitive abroad.
"One reason for the lethargy is the very conservative corporate guidance, which keeps expectations for stock prices largely under wraps," Brian Heywood, CEO at Taiyo Pacific Partners, told Dow Jones Newswires.
Consistently bullish movements in US markets are nevertheless alarming, he added.
"Much of the buying in US shares... could face correction quickly if sentiment goes sour," he said.
"On the other hand... cheap valuations certainly leave room for more Japan share buying, the threat of a sudden sell-off overseas -- and a Japan knee-jerk reaction -- will not go away," he said.
US stocks were broadly higher Monday -- bolstered by the Federal Reserve's caution over raising rates and a handful of new merger deals -- with the S&P 500 index closing up 0.48 percent at 1,997.92, after topping the 2,000 mark for the first time. The Dow rose 0.44 percent.
In Tokyo, Sony was down 0.25 percent at 1,967.0 at midday while Mitsubishi Motors slipped 0.50 percent at 1,178.