The Nikkei share average slipped 0.28 percent today as domestic demand-linked stocks such as Fast Retailing Co. Ltd. fell on profit-taking.
But the market losses were limited as chip-related issues such as Tokyo Electron Ltd. benefited from expectations of growing demand.
Shares of Myojo Foods Co. Ltd. shot up after bigger rival Nissin Food Products said it would bid 870 yen a share for Myojo, which is fighting a hostile takeover bid from US hedge fund Steel Partners.
Stronger-than-expected gross domestic product data released on Tuesday continued to support share prices, but some voiced caution over the outlook for the economy and share prices.
"The GDP was a relief to investors but recent economic data have been mixed," said Yutaka Shiraki, a senior strategist at Mitsubishi UFJ Securities Co. Ltd.
"Corporate earnings for the next fiscal year will be affected by the economic recovery, and investors are not confident about that outlook."
The Nikkei was down 46.08 points at 16,243.47, after booking a 1.7 percent gain yesterday on the strong GDP numbers. The broader TOPIX index was down 0.28 percent at 1,592.00.
Soichiro Monji, chief strategist in the equity management department at Daiwa SB Investments, said foreign investors have cut their exposure to Japanese stocks this year, putting the market under pressure.
"There seems to be a trend where fund managers allocate more money in markets which are rising," he said. "Those outperforming stock markets draw more money."
His comment came after a Merrill Lynch survey for November that showed that the number of global fund managers who said they want to overweight Japanese stocks in the next 12 months fell to 5 percent from 12 percent. Merrill said 5 percent was the lowest since December 2003.
Trade volume slowed, with 1.6 billion shares changing hands, compared with 1.8 billion shares on Tuesday. Decliners outnumbered advancers by a ratio of nearly two to one.