Japan's Nikkei average declined for a third straight session on Monday, hit by a slide in Mitsubishi Electric shares after the government suspended dealings with the firm.
But investors remained hopeful that Greece and its private creditors would be able to clinch a long-awaited debt swap deal this week and avoid a chaotic default.
Mitsubishi Electric shed 14.8% and topped the main board as the heaviest traded share by turnover after Japan's Defence Ministry suspended dealings with the heavy electric machinery maker, saying it had overcharged for its services.
The stock was approaching "oversold" territory, with its with its 14-day relative strength index at 33.
"Earnings results for major exporters and high-tech firms were obviously hit by Thai floods and their forecast cuts were inevitable and expected, but Mitsubishi Electric's drop was an extra drag on the market today," said Fujio Ando, senior managing director at Chibagin Asset Management.
The benchmark Nikkei fell 0.5% to 8,793.05 in its third straight session of losses after hitting a three-month high last week. Some market participants said last week's rally was spurred by month-end window dressing by domestic institutional investors.
The benchmark is up 4% this month, heading for its best January performance since 1999.
The broader Topix slipped 0.5% to 757.01, while reports over the weekend pointed to a debt swap deal between Greece and its private creditors this week, a crucial precursor for sealing a new bailout for the debt-ridden country.
Trading volume slipped, with 1.65 billion shares changing hands on the main board, down from 1.94 billion shares on Friday.
Despite slide in Mitsubishi Electric shares, Ando said the government's move would have a limited impact on the company.
"The suspension may last for six months and they might get a fine but keep in mind that the company is a 3 trillion yen annum company so the impact is limited," he said.