"Considering there is profit-taking selling from domestic institutional investors like pension funds ahead of book closings at the end of March, the market has been holding up very well," said Cosmo Securities' equity strategist Kenichi Azuma.
"Recent gains among tech shares also suggest rapidly improving investor sentiment towards Japanese stocks, so I am not worried at all about today's fall in share prices".
The Nikkei lost 53.31 points to end at 11,597.71.
The broader TOPIX index fell 0.36 percent to 1,162.49.
Trade remained slow, although volume picked up from Monday's level. About 1.340 billion shares changed hands on the first section, compared with 1.296 billion on Monday, which was the smallest daily total since December 29. Decliners outpaced gainers 969 to 480.
Citizen Watch tumbled 3.4 percent to 954 yen, making it the biggest percentage loser among the Nikkei 225 component stocks.
The maker of light-emitting diodes (LEDs) and other key cellphone components attributed the downward revision to its earnings partly to sluggish demand for mobile phone parts.
Tokyo Steel fell 4.4 percent to a two-week closing low of 1,556 yen.
Central Glass Co sank 5.2 percent to 697 yen after it cut its parent-only net profit forecast by 8.2 percent to 10.10 billion yen ($95.73 million) for the year to March, prompting Deutsche Bank to downgrade its rating to "hold" from "buy" and to cut its target share price to 750 yen from 860 yen.
NEC climbed 2.1 percent to 669 yen, its highest close since October 8, after Morgan Stanley raised its rating on the firm to "overweight" from "equalweight", saying it was undervalued, according to a market source.
NEC Electronics' shares fell 1.9 percent to 5,770 yen.
Sharp Corp, the world's largest maker of LCD televisions, gained 1.1 percent to 1,660 yen.
Some analysts voiced concerns about recent rises in technology stocks, however, saying some stocks are nearing the overbought level even considering an expected improvement in their earnings from the next fiscal year.
Fujitsu Ltd rose 1.1 percent to 672 yen, the highest close since September 14, after the electronics maker said it would earn a special profit of 95.8 billion yen ($908 million) from the sale of shares in Advantest Corp and Fanuc Ltd.
Fujitsu said the special gain would increase its group net profit by 53.3 billion yen, but added that it has no plan now to revise its earnings estimates for the year to March 31.
Shares of Advantest, the world's top maker of chip-testing equipment, dropped 2.1 percent to 8,890 yen and industrial robot maker Fanuc shed 2.4 percent to 6,930 yen even after the companies announced share buyback plans on Monday.