The Nikkei average edged down 0.41 percent on Tuesday as shares of shipping firms and airlines fell on concern about higher fuel costs and investors took profits in Mitsui Sumitomo Insurance Co. and other recent gainers.
Toshiba Corp. added 0.6 percent after the Nikkei business daily reported the company's plan to boost its flash memory production capacity and Konica Minolta Holdings climbed 2.6 percent after Daiwa Institute of Research issued a bullish report about it.
Rohm Co. , on the other hand, lost 2.2 percent after Merrill Lynch reiterated a sell rating on the stock.
Caution ahead of the Bank of Japan's policy meeting later this week helped keep the market in a tight range.
The market view is that when interest rates go up, the stock market falls, even though that's not always the case. That notion is psychologically weighing on the market, said Toru Otsuka, deputy general manager of Mizuho Investors Securities Co. Ltd.'s investment information department.
The Nikkei shed 73.54 points to 17,760.94 as of 0444 GMT, while the broader TOPIX index was 0.54 percent lower at 1,751.60.
With U.S. crude oil futures rising sharply on Monday, concern about higher fuel costs dragged on airlines and shipping stocks but lifted hopes for profit prospects for oil companies.
Japan Airlines Corp. , Japan's largest airline by revenues, declined 2.5 percent to 233 yen and Nippon Yusen KK , Japan's top shipping firm, was down 1.7 percent at 1,134 yen.
Meanwhile, Nippon Oil Corp. , Japan's top refiner, gained 1.1 percent to 1,119 yen and Japan's biggest oil developer INPEX Holdings Inc. added 0.9 percent to 1.14 million yen.
Mitsui Sumitomo Insurance fell 4.9 percent to 1,611 yen, paring part of its 6.6 percent gain in the last two sessions.