TOKYO: Japanese shares fell 0.36 percent on Monday morning, weighed by profit-taking after last week's rally, as concerns over unrest in the Arab world prompted risk aversion, brokers said.
The benchmark Nikkei index fell 38.71 points to 10,804.09 on the Tokyo Stock Exchange, after closing at its highest level in nine-and-a-half months on Friday.
The Topix index of all first-section shares slipped 0.28 percent, or 2.72 points, to 970.88.
The Middle East unrest and rising Portuguese debt yields may weigh on equity sentiment Monday, especially as the Nikkei looks technically overbought, said Tsuyoshi Segawa, equity strategist at Mizuho Securities.
"The index continues to look top-heavy," he told Dow Jones Newswires.
Fears have grown that hundreds of people were killed in a brutal government crackdown on demonstrators demanding an end to Moamer Kadhafi's 41-year, iron-fisted rule.
As the protests crept nearer the Libyan capital Tripoli, the turbulence shaking the Arab world following the revolutions in Egypt and Tunisia also spread to Morocco, where thousands rallied for change across the country.
But Segawa said a large selloff was nevertheless unlikely, with investment funds continuing to flow into global equity markets on the back of credit-easing measures and due to strong US and Japanese economic fundamentals.
Concerns over government crackdowns in China also weighed on investor sentiment, said Hideyuki Ishiguro, supervisor of investment strategy at Okasan Securities.
China has detained top activists and deployed heavy security in large cities after the launch of a web campaign calling for protests echoing popular uprisings in the Arab world, according to campaigners.
Meanwhile Portugal has seen its cost of borrowing soar on the back of the economic downturn as money markets place further pressure on weaker eurozone states, keeping concerns for the bloc's economy in view.
US stocks closed higher Friday for the third straight weekly gain, hitting fresh two-year highs in a late-session rally ahead of a long holiday weekend.
US equity and bond markets will be closed Monday in observance of the Presidents Day holiday.
Investors are also refraining from buying aggressively as Chinese markets react to a hike in the reserve requirement ratio announced late Friday by China's central bank, Ishiguro said.
Some exporter shares fell as the yen stayed strong against the dollar, trading in the lower half of 83 to the greenback. Honda dropped 0.94 percent to 3,675 yen and Olympus was down 2.23 percent at 2,411.
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