Japan's Nikkei average closed at a two-week low on Monday, falling below the 40,000 mark, as traders sold shares to lock in profits on the first day of the country's new fiscal year.
The Nikkei index fell 1.4 percent to 39,803.09, its lowest close since March 18, after opening up 0.7 percent.
The broader Topix index fell 1.71 percent to 2,721.22 points.
Institutional investors typically sell stocks to lock in profits on the first day of the fiscal year, said Shoichi Arisawa, general manager of investment research at Iwaikosmo Securities.
The Nikkei index rose 19 percent in 2024, surpassing the 40,000-point mark to reach record levels in March, after a steady rise of 54 percent since early 2023.
Chip-related shares Tokyo Electron and Advantest lost 3.21 percent and 4.96 percent, respectively, while Toyota Motor Corp. fell 4.03 percent.
Optimism in Japan's services sector rose to a 33-year high in the first quarter, helped by a tourism boom and higher profits from higher prices, a Bank of Japan survey showed.
The survey also showed that large companies plan to increase their capital spending by 4.0 percent in the fiscal year that runs to March 2025, after an expected increase of about 11.5 percent in the last fiscal year.
Strategists said the BOJ survey was not a major market mover because its results were in line with their expectations.
The currency market was stable, providing little signal for domestic stocks, said Shigetoshi Kamada, general manager of research at Tachibana Securities.
The yen touched a 34-year low against the dollar at 151.975 yen on Wednesday, and was last trading at 151.35 to the dollar.
Heavy machinery makers fell, with Kawasaki Heavy Industries and Mitsubishi Heavy Industries falling 6.36 percent and 4.5 percent, respectively.
