Tokyo stocks fell 0.80 percent Tuesday morning on a negative lead from Wall Street and a firmer yen, as investors keep an eye on Greece's long-running bailout talks.
The Nikkei 225 index at the Tokyo Stock Exchange was down 164.25 points at 20,292.94 by the break, while the Topix index of all first-section shares slipped 0.84 percent, or 14.04 points, to 1,647.95.
"A lot of people are worried about Greece," Kirk Hartman, chief investment officer of Wells Capital Management, told Bloomberg News.
"It would be better for Greece to restructure, then negotiate. We're in for a long summer."
Greece and its creditors have been unable to reach an agreement that will unlock much needed funds for Athens to avert a default and possible eurozone exit.
Also dampening sentiment, China's National Bureau of Statistics said inflation came in at 1.2 percent in May, down from April's 1.5 percent.
The figure is the latest showing signs of weakness in the world's second biggest economy and reignites worries about the country slipping into a painful spiral of deflation, which could further drag on any recovery.
A pick up in the yen hit Japanese exporters with the dollar at 124.45 yen, against 124.47 yen in New York and 125.52 yen in Tokyo earlier Monday.
The US currency was dragged down Monday after media reports that US President Barack Obama had told the G7 summit in Germany that the strong dollar "posed a problem".
The White House denied that quickly, and Obama told reporters: "I did not say that. And I make a practice of not commenting on the daily fluctuations of the dollar or any other currency."
Toyota fell 0.93 percent to 8,280 yen, tyre maker Bridgestone slipped 2.11 percent to 4,715.5 yen and Japan's biggest bank Mitsubishi UFJ sank 0.20 percent to 899 yen.
On Wall Street, the Dow lost 0.46 percent, the S&P 500 shed 0.65 percent, and the Nasdaq fell 0.92 percent.