The Nikkei share average added 0.31 per cent to 28,642.19, extending its recovery from a four-month low hit earlier this month, but it faced multiple resistances around the current levels, including the 25-day average at 28,717 and 100-day average at 28,933.
The broader Topix ticked up 0.06 per cent to 1,920.67.
“Lots of players, prop traders, retails and quants, are all active in range-trading around the current levels,” said Takeo Kamai, head of execution services at CLSA.
In the very near term, the market is also capped by expectations of outflows due to MSCI’s regular rebalance on Wednesday, as 29 Japanese shares will be excluded from its main index.
Few investors are eager to test the upside as they assess whether the risk inflation in the United States and elsewhere hastens fast enough to prompt central banks to reduce its monetary stimulus.
Domestically, elevated COVID-19 infections remain a problem as the government appears to push ahead with holding the Olympics in July despite health warnings against it.
Despite the small gains in the index, only about a third of shares rose while nearly two-thirds declined on the main board.
Among gainers, Recruit Holdings rose 2.6 per cent to hit a record high, extending its bull run since its earnings announcement earlier this month.
Internet firm Z Holdings rose 3.4 per cent in heavy trade, while Panasonic gained 3.6 per cent.
On the other hand, steelmakers succumbed to profit-taking after their heavy gains so far this year, with Nippon Steel falling 4.4 per cent and Kobe Steel losing 3.5 per cent.
