Tokyo's Nikkei stock index closed 0.93 percent lower on profit-taking Thursday, a day after it soared to its highest close in almost four-and-a-half years.
The index shed 106.68 points to 11,357.07. The Topix index of first-section shares was flat, edging up 0.36 points to 969.18, although 5.14 billion shares changed hands, the second highest turnover in the exchange's history -- behind March 15, 2011, the first trading day after the March 11 quake-tsunami.
Thursday's dip in the Nikkei came as investors took profits after the index surged almost four percent to its best finish since the end of September 2008, just after the collapse of Wall Street giant Lehman Brothers that sparked a global sell-off.
Traders were also spooked by soft corporate reports from high-profile companies.
Nikon lost 18.94 percent to 2,139 yen after releasing worse-than-forecast earnings Wednesday and warning it was chopping its full-year profit outlook.
"Nikon's poor results and forecast cut really took the market by surprise," said CLSA equity strategist Nick Smith.
"Most of the earnings disappointments continue to come from technology firms, which will not get to fully factor in vastly more favourable currency levels until two quarters down the road," he told Dow Jones Newswires.
Japanese firms were battered by the strong yen, which hit record highs on the dollar in late 2011 around 75, but it has fallen steeply in recent months.
Sony was up 2.56 percent at 1,519 yen, announcing its earnings after markets closed which showed its net loss from April to December shrank 75 percent on-year.
Mazda Motor jumped 12.01 percent to 317 yen on news late Wednesday that it had swung back to a profit in the nine months to December, while it also boosted its full-year earnings forecast.
On currency markets, the euro edged up to 126.59 yen from 126.46 yen and to $1.3526 from $1.3519 in New York on Wednesday.
The dollar was nearly flat at 93.55 yen from 93.57 yen in US trading.