Japan's Nikkei stock average moved away from a record high on Monday, weighed down by microchip-related stocks, after U.S. stocks suffered losses on Friday.
Nintendo also crashed after media reports said that the successor to its Switch gaming console would only be released in early 2025 instead of the end of 2025.
The benchmark Nikkei index fell 0.37% to 38,344.91 at 0221 GMT, after hitting 38,865.06 on Friday. It was just 93 points away from the historic record set on the last trading day of 1989, at the height of Japan's economic bubble.
The negative impact of technology stocks was confirmed by the better performance of the Topix index, which rose by 0.09%.
There were also fewer transactions due to the presidential holiday in the US, which likely kept foreign investors away.
The Nikkei is already up a whopping 14.6% this year and technical indicators warn of overheating.
Its relative strength index (RSI) is currently around 74.1 and has been crossing the 70 threshold for a week, indicating an overbought market.
The Nikkei volatility index hit its highest level in a month on Friday.
“Unless there is a new catalyst, it seems difficult to push prices back to record highs,” said Maki Sawada, strategist at Nomura Securities.
She also pointed out that rising U.S. bond yields, particularly in technology stocks, were offsetting support from the weak yen.
Chip sector heavyweights Advantest and Tokyo Electron were the biggest drag on the Nikkei, losing 77.5 and 39 index points, down 4% and 1.2% respectively.
However, Nintendo saw the largest percentage decline with a decline of 6.7%.
Conversely, SoftBank Group, an investor in artificial intelligence-focused startups, boosted the Nikkei index by 20 points, up 1.3%, according to a recent report. It was revealed that founder Masayoshi Son wants to raise up to $100 billion for the chip manufacturing company. (Reporting by Kevin Buckland, Editing by Shri Navaratnam)