Japanese shares inched lower Monday as export-oriented issues were hurt by a stronger yen and investors sold stocks to lock in immediate profits after recent gains.
The benchmark Nikkei 225 Stock Average lost 3.3 points, or 0.04 per cent, to end at 9,003.48 after rising 1.5 per cent Friday.
The broader-based Topix index was down 0.74 points, or 0.1 per cent, at 769.34.
Tokyo stocks opened higher after the blue-chip Dow Jones Industrial Average surged 2.2 per cent Friday in the United States after eurozone leaders decided at a summit to relax conditions on emergency loans for Spanish banks and deliberate on ways to help struggling Italian banks.
But the Nikkei and the Topix gradually declined as the yen's strength pushed exporters lower. A stronger yen makes Japanese goods more expensive abroad and hurts repatriated earnings.
Shares in Honda Motor Co fell 0.69 per cent, Toyota Motor Corp declined 0.47 per cent, Sony Corp lost 0.53 per cent and Canon Inc was down 0.32 per cent.
Contributing to early gains was an unexpected rise in the sentiment of large Japanese manufacturers. It improved in the April-to-June quarter despite the yen's strength and the ongoing eurozone debt crisis, the Bank of Japan's Tankan survey showed Monday.
The index of the closely watched survey rose to minus 1 from minus 4 three months ago in a sign of economic recovery from last year's earthquake and tsunami in Japan and flooding in Thailand, which closed Japanese factories and suppliers.
The figure was above the average forecast by economists of minus 4 in a poll conducted by the Kyodo News agency.
A negative number indicates pessimists outnumber optimists.
On currency markets at 3 pm (08:00 SA time), the dollar traded at 79.52-54 yen, down from Friday's 5 pm quote of 79.60-61 yen.
The euro was quoted at 1.2621-2624 dollars, up from 1.2570-2571
dollars late Friday, and at 100.38-40 yen, up from 100.06-10 yen. - Sapa-dpa