The Nikkei sank 1.6% to end the day at 49,373.25, closing below the key psychological 50,000 mark for the first time since December 3.
The broader Topix Index lost 1.8% to 3,370.50.
Shares of Yaskawa Electric, a robotics company developing “physical AI”, slumped 7%, while data-center cable maker Fujikura slipped 6.7%, making them the biggest percentage decliners in the Nikkei.
Chipmaker Renesas lost 5.1%, and silicon processor Shin-Etsu Chemical sank 4.1%.
Some of Japan’s largest tech stocks saw smaller declines after sharp losses on Monday.
AI-focused investor SoftBank Group fell 1.7%, rebounding from an earlier drop of up to 4.5%, following a 6% tumble in the previous session.Chip-testing tool maker Advantest, an Nvidia supplier, was down 1.4%, following a 6.6% plunge on Monday.
“After yesterday’s big declines, some of the big names are attracting dip buyers,” said Maki Sawada, an equities strategist at Nomura Securities.
At the same time, “today’s decline is broader,” and ahead of risk events, including the U.S. nonfarm payrolls release on Tuesday and the Bank of Japan policy decision on Friday, “a wait-and-see posture is taking hold” in the market, she said.
Of the Nikkei’s 225 components, 188 fell, 36 rose, and one ended flat.
Among the Tokyo Stock Exchange’s 33 industry groups, only airlines, paper and agriculture sectors traded in the green, with airlines up 1.5% but the other two gaining just 0.2%.