Tokyo stocks ended slightly lower after erasing earlier advances Tuesday, as investors locked in gains and real estate issues met selling amid rising Japanese long-term interest rates.
The yield on Japan's benchmark 10-year government bond briefly climbed 0.005 percentage point from Monday's close to 0.980 percent to hit a fresh 11-year high, tracking an overnight rise in long-term U.S. Treasury yields.
The 225-issue Nikkei Stock Average ended down 122.75 points, or 0.31 percent, from Monday at 38,946.93. The broader Topix index finished 8.32 points, or 0.30 percent, lower at 2,759.72.
On the top-tier Prime Market, decliners were led by real estate, consumer credit and precision instrument issues.
The U.S. dollar was firm and traded largely in the mid-156 yen range in Tokyo, after some Federal Reserve officials expressed caution about cutting interest rates amid signs of persistent inflation, fueling the prospect that the U.S.-Japan interest rate gap could remain wide for longer.
Stocks opened higher as technology issues tracked gains in their U.S. counterparts, but then dropped as a continued rise in Japanese government bond yields prompted selling of real estate issues on concerns over higher borrowing costs, analysts said.
High-tech shares also retreated in the afternoon as investors grew cautious before U.S. chip giant Nvidia Corp. releases its quarterly earnings on Wednesday, analysts said.
"Investors were refraining from buying as the market's attention moves toward Nvidia," said Toshikazu Horiuchi, equity strategist at IwaiCosmo Securities Co. "They are waiting to see how the market reacts, as it could swing wildly depending on the outcome."
