Japanese stocks closed 0.27 per cent lower on Tuesday, taking a breather after a six-day winning streak, brokers said.
The benchmark Nikkei-225 index fell 27.13 points to 10,140.47. The broader Topix index of all first-section shares slipped 2.23 points or 0.25 per cent to 896.70.
"It's natural that the market took a breather after six straight days of rises until yesterday," said Hideaki Higashi, a strategist at SMBC Friend Securities.
"The yen's upturn was also a good excuse to sell" for investors who had been seeking opportunities to reap profits on the recent gains, he said.
The US dollar was quoted around Y89.00 in Tokyo afternoon trade, down from Y89.57 in New York late Monday.
Tokyo share prices had been rebounding strongly in the past few days on receding fears over the effects of Dubai's debt crisis, the yen's drop against the US dollar and hopes for a big stimulus package in Japan.
The government on Tuesday announced a huge $US274 billion ($A300.6 billion) stimulus to jump-start a fragile recovery in the world's second largest economy, including more than $US80 billion ($A87.77 billion) in direct spending.
Higashi said the widely reported stimulus package did not boost the stock market on Tuesday as it had already been priced in.
Japan Airlines (JAL) fell 2.80 per cent to end at Y104 after a 7.0 per cent jump on the previous day amid uncertainty over government assistance to the ailing carrier.
Some exporters went down on profit-taking, with Canon falling 1.06 per cent to Y3,710 and Honda skidding 0.32 per cent to Y3,040.
