Stocks failed Tuesday to keep early gains and ended lower, hit by waves of selling to lock in profits after a two-session rally.
The Nikkei 225 average closed down 3.72 points, or 0.02 percent, at 21,505.31 after surging 303.22 points Monday.
The Topix, which overs all first-section issues on the Tokyo Stock Exchange, was off 4.12 points, or 0.25 percent, at 1,611.69. It rose 24.17 points Monday.
The market surged at the outset after the stronger than expected Institute for Supply Management manufacturing index for March helped lift the Dow Jones Industrial Average to a six-month high Monday, brokers said.
The yen’s weakening against the dollar and rises in European equities also contributed to the early morning jump.
After the initial round of buying ended, however, profit-taking pressure gradually built up while fresh buying incentives were absent, brokers said.
“Given the Nikkei’s 475-point advance in the two successive rallies, investors moved to sell for now,” said Yoshihiko Tabei, chief analyst at Naito Securities Co.
Buying momentum was weak with players growing cautious ahead of the start of earnings reporting season in Japan and the United States later this month, Tabei added.
The positive ISM index reading, on top of the recent Chinese manufacturing data, has increased investor appetite. But there are many things to watch closely, including developments related to Britain’s exit from the European Union and the U.S.-China trade dispute, brokers pointed out.
The Nikkei is unlikely to retake 22,000 anytime soon, many analysts agreed.
Falling issues outnumbered rising ones 1,181 to 886 in the first section, while 72 issues were unchanged.
Volume decreased to 1.343 billion shares from 1.419 billion Monday.
Domestic demand-oriented names met with selling, including Railway operator JR Tokai, down 2.98 percent, daily goods maker Kao, down 1.79 percent, and mobile phone carrier KDDI, down 1.55 percent.
Bicycle retailer Asahi plunged 8.34 percent on a disappointing operating profit projection for the business year through next February.
Among other losers were cybermall operator Rakuten and technology giant Sony.
Meanwhile, semiconductor-related issues rose after U.S. technologies fared well in New York on Monday. Of them, wafer producer Sumco gained by 5.42 percent, semiconductor inspection device maker Advantest by 4.54 percent, and chipmaking gear manufacturer Tokyo Electron by 3.09 percent.
Financials attracted buying thanks to a rise in U.S. long-term interest rates, with insurer Dai-ichi Life boosted by 2.78 percent and mega-bank group Mitsubishi UFJ by 1.68 percent.
Also on the sunny side were industrial robot producer Fanuc and drugmaker Eisai.