Nikkei falls after sharp gains as US-Japan trade talk weighs
As of 0210 GMT, the Nikkei was down 1.1 per cent at 40,048.14. It is set to snap a five-session winning streak that pushed it to its highest level since mid-July in the previous session.
The broader Topix slipped 0.87 per cent to 2,828.15.
"The market was overheated, but there were some factors that boosted demand last month," said Hiroyuki Ueno, chief strategist at Sumitomo Mitsui Trust Asset Management.
Japanese equities mirrored a rally in US stocks in the past several sessions, but demand was also supported by dividend payouts investors received after corporate shareholders' meetings in June, as well as corporate share buybacks, said Ueno.
The Nikkei rose 6.6 per cent in June, marking its biggest monthly gain since February 2024. In the last five sessions of June, the index gained 5.5 per cent.
The Relative Strength Index (RSI), a technical measure for an investment momentum, dropped to 67.6 on Tuesday from the "overbought" condition of 74.5.
Meanwhile, US President Donald Trump expressed frustration with US-Japan trade negotiations on Monday, casting clouds over ongoing trade talks between the two countries.
US Treasury Secretary Scott Bessent also warned that countries could be notified of sharply higher tariffs as a July 9 deadline approaches despite good-faith negotiations.
"Investors weighed trade factors, but if the outlook of the talks becomes clear, then the market gauges stocks with fundamentals and the Nikkei has the potential to rise further," said Ueno.
Uniqlo-brand owner Fast Retailing fell 3.3 per cent to drag the Nikkei the most. Chip-equipment maker Tokyo Electron slipped 1.52 per cent.
Bucking the trend, cable maker Fujikura jumped 2.2 per cent to become the biggest percentage gainer on the Nikkei.
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