The Nikkei average fell 0.7 percent on Tuesday after booking a six-month closing high the previous day, with bank shares such as Mitsubishi UFJ Financial Group taking a breather following sharp gains fueled by optimism about the U.S. banking system.
Dentsu Inc, Japan's biggest advertising agency, fell more than 5 percent after reporting a fourth-quarter loss of 24.6 billion yen ($250 million) and forecast a weaker recovery than expected this year.
Exporters also fell, but Suzuki Motor rose after saying it escaped a loss in January-March, the final quarter of last business year, thanks to growth in its main Indian market. But it forecast an 87 percent drop in profit this year citing slumping global demand and a stronger yen.
Investors are locking in profits for now as a big event has passed, in which the results of U.S. government stress tests on big banks came in as expected, said Takahiko Murai, general manager of equities at Nozomi Securities.
The focus will now shift to U.S. consumer spending, which accounts for a major part of its GDP, as investors will start examining fundamentals to see if hopes for an economic recovery, which had pushed up stock prices by more than 30 percent so far, is really taking place.
The benchmark Nikkei slipped 65.80 points to 9,386.18. It rose 0.2 percent the previous day to its highest close since November 5.
Tuesday's fall came after the Nikkei had recovered about 34 percent from an intra-day low hit on March 10.
The broader Topix shed 0.7 percent to 894.40.
After recent sharp rallies, Japan's banking subindex fell 2.1 percent.
Top lender Mitsubishi UFJ slid 2.8 percent to 655 yen and Mizuho Financial Group shed 1.9 percent to 255 yen.
Nomura Holdings Inc, Japan's biggest brokerage, lost 3.1 percent to 691 yen.
Shares of Dentsu dropped 5.2 percent to 1,848 yen, one of the top drags on the Nikkei 225.
Exporters also fell. Toyota Motor Corp, the world's biggest automaker, slipped 1.3 percent to 3,740 yen, while Honda Motor Co dipped 0.7 percent to 2,880 yen.
Nissan Motor Co, which is set to report results after the market close, fell 0.8 percent to 511 yen.
But Suzuki shares rose 0.3 percent to 2,030 yen, after opening lower.
Among high-tech exporters, Sony Corp shed 2.8 percent to 2,620 yen.
(Reporting by Aiko Hayashi; Editing by Michael Watson)