Tokyo stocks closed down 0.99 percent on Thursday, ending six straight days of gains as data showing machine orders -- a key indicator of the economy's strength -- unexpectedly shrank in August.
The Nikkei-225 index at the Tokyo Stock Exchange fell 181.81 points to 18,141.17, while the Topix index of all first section shares slipped 0.79 percent, or 11.77 points, to 1,481.40.
Japanese shares initially swung between gains and losses after a government report Thursday showed machine orders dipped 3.5 percent year-on-year in August, significantly worse than most economists' estimates.
On a month-on-month basis, orders shrank 5.7 percent, far below estimates for a gain of 2.3 percent.
Machine orders "have been weak for three straight months, and this may have been one reason for the selling," Hiroaki Hiwada, a Tokyo-based strategist at Toyo Securities Co, told Bloomberg News.
Mitsushige Akino, executive officer at Ichiyoshi Asset Management, added that reactionary selling after recent gains might see the Nikkei drop below 18,000 in the coming days.
"But we're still in a more risk-on state rather than a risk-off state, so I expect equities to remain stable," he added.
He added that expected gains in Chinese stocks would also lift sentiment.
At Tokyo's close, Shanghai stocks had surged more than three percent as investors returned from a week-long break that saw a rally across global markets.
In Tokyo share trading, market heavyweight Fast Retailing, operator of the Uniqlo clothing chain, dropped 2.32 percent to 48,640 yen, while Sony fell 1.62 percent to 3,153 yen.
Toyota, which on Tuesday unveiled a self-driving car prototype, edged down 0.02 percent to 7,349 yen.
On currency markets, the dollar traded at 119.82 yen Thursday afternoon in Tokyo compared with 120.00 yen late Wednesday in New York.
The euro rose to $1.1251 from $1.1237 in US trade and was flat at 134.83 yen in Tokyo