The Nikkei fell 0.28 percent on Friday, retreating from a seven-year closing high as drops in property investment trust prices dragged down Mitsubishi Estate Co and other property shares and the yen's slide hit importers like food and paper companies.
But chip-testing equipment maker Advantest Corp and its peers rose after the Philadelphia Stock Exchange Semiconductor Index jumped 3 percent to its highest since May 2006.
"After rising for the past six straight sessions, the market was ready to take a break," said Yumi Nishimura, a manager in the investment advisory section at Daiwa Securities SMBC Co Ltd. The Nikkei shed 51.67 points to close at 18,188.63, after logging its highest close since May 2000 the previous day.
The broader TOPIX index lost 0.64 percent to 1,777.99. Masaru Hamasaki, senior strategist at Toyota Asset Management, said the market might struggle to advance as investors await quarterly earnings announcements next month.
"To push prices higher, investors need confirmation" of solid corporate earnings, he said. But he added that investor appetite remains strong. "It's definitely a buy if the Nikkei falls below 18,000. If not, anywhere below 18,500 may present a buying opportunity." Trade volume fell slightly, with 1.9 billion shares changing hands, down from 2.2 billion on Thursday. Decliners outnumbered advancers by about two to one.
The Japanese REIT market was also under pressure as the MSCI US REIT index fell for the fourth straight day on Thursday. In addition, Goldman Sachs downgraded its view on Japan's REIT sector to neutral from attractive.
The falls in REIT shares dragged down shares of property developers, with Mitsubishi Estate down 3.9 percent at 3,410 yen and Mitsui Fudosan Co Ltd falling 3 percent to 3,530 yen.
Meanwhile, dairy food producer Meiji Dairies dropped 3.3 percent to 770 yen and Nippon Paper shed 1.5 percent to 405,000 yen on concern that the recent yen weakness would put them under pressure when importing materials. The yen fell to a 4-1/2-year low against the dollar on Friday. In the technology sector, Advantest gained 3.6 percent to 5,490 yen.