A disappointing showing by Japanese Prime Minister Yoshihide Suga’s Liberal Democratic Party (LDP) in a local election on Sunday added to the cautious mood.
“The LDP’s recovery wasn’t strong, leaving concerns about the upcoming general election,” said Nobuhiko Kuramochi, senior strategist at Mizuho Securities.
Nikkei share average lost 0.64 per cent to 28,598.19, its lowest close in two weeks, while the broader Topix dropped 0.37 per cent to 1,948.99.
That was a clear under-performance following new record highs scaled by Wall Street shares on Friday after jobs data for June showed robust hiring but limited signs of wage inflation.
Many cyclical shares slumped, led by steelmakers, one of the most sensitive sector to the global economy on rising concerns about the Delta variant of COVID-19.
JFE Holdings lost 4.0 per cent, while Nippon Steel shed 3.5 per cent.
Coronavirus cases in Tokyo have been on the rise over the past fortnight, hitting a five-week high and raising worries the government may declare its third state of emergency this year.
Elsewhere, Softbank Group fell 5.4 per cent to seven-month lows after China’s cyberspace regulator ordered smartphone app stores to stop offering Didi Global Inc’s app after finding that it had illegally collected users’ personal data.
Softbank is a major backer of the Chinese ride-hailing start-up.
On the other hand, some construction firms with strength in civil engineering gained after landslides triggered by torrential rains hit the central city of Atami at weekend, sweeping away 130 buildings.
Raito Kogyo, a construction firm with expertise in slope and foundation improvement, rose 1.3 per cent.
CE Management Integrated Laboratory, which offers geological survey and disaster prevention systems, gained 3.1 per cent.
