The Nikkei 225 average managed to end slightly higher after erasing most of its earlier gains amid a lack of fresh incentives.
The Nikkei gained 6.36 points to close at 9,533.75. The Topix meanwhile finished 1.76 points lower at 788.48.
The market got off to a positive start following a gain in the Dow Jones industrial average Friday, which was helped by stronger than expected U.S. jobs data.
After the initial buying ran its course, the Nikkei trimmed its gains, pressured by selling to lock in profits and weak Chinese trade data released in the late morning, brokers said.
The Nikkei briefly sank into negative territory in the afternoon, led by index futures, as the yen edged up against the dollar and the euro.
“The market has been waiting for fresh buying incentives,” Hiroichi Nishi, equity general manager at SMBC Nikko Securities Inc, said, adding that are signs of market overheating after the Nikkei’s 10 percent rally in the past month.
Investors held off on active trading ahead of key events later this week, including the U.S. Federal Reserve’s two-day policy-setting meeting starting Tuesday and the release of the Bank of Japan’s “tankan” quarterly business sentiment survey Friday, brokers said.
Most market sources expect the Fed to take some sort of monetary easing steps at the upcoming meeting, Nishi said.
Investors continued to worry about the course of the fiscal cliff problem in the United States, brokers said.
But selling pressure was limited thanks to hopes for the next administration after the Lower House election Sunday, Nishi said.
Losers edged winners 784 to 746 in the first section, while 159 issues were unchanged.
Volume fell to 1.944 billion shares from 2.092 billion Friday.
Some semiconductor-related issues drew active buying, with Sumco surging 17.24 percent to score a daily limit gain and Advantest ending up 3.94 percent.
Mitsubishi Materials and Mitsui Mining & Smelting posted hefty gains, as did Fast Retailing.
By contrast, Sharp, TDK and Canon were downbeat, as were Honda and Nissan.
Also on the minus side were Japan Tobacco, Kansai Electric, Sumitomo Mitsui and Nomura.
Japanese government bonds turned higher Monday, helped by steady demand despite weaker U.S. Treasury securities Friday.
The lead December contract on 10-year JGBs rose 0.11 point from Friday to end at 145.19. Volume dropped to 22,941 contracts from 54,567.
In late interdealer trading in cash JGBs, the yield on the latest 326th 10-year issue with a 0.7 percent coupon stood at 0.695 percent, down from 0.705 percent late Friday.
JGBs traded on a firm note although U.S. Treasury securities weakened Friday on stronger than expected U.S. employment data for November.
The strength of the JGB market stemmed from steady demand, an official at a bank-affiliated brokerage firm said, adding that key 10-year yields above 0.7 percent tend to draw buybacks.
“JGBs attracted purchases after facing selling pressure late last week,” a market source said.
“The JGB market is expected to remain buoyant until the end of the year,” said an official at a major securities firm.