Japan's Nikkei average fell on Thursday in profit-taking ahead of a futures settlement, as market participants fretted over key debt auctions in Europe and a European Central Bank meeting this week.
The Nikkei dropped 0.7% to 8,385.59, below its 25-day moving average near 8,483 but above the 61.8% retracement level of its rally from late November to early December, near 8,363.
"The benchmark has no sense of direction and trading volumes remain thin. It's a depressing start to the trading year," said Yoshihiro Ito, chief strategist at Okasan Online Securities.
The benchmark has largely kept to a narrow range of 8,350 to 8,500 since mid-December.
Market players said investors sold shares ahead of a closely watched special quotation settlement of January futures contracts.
The broader Topix index eased 0.9% to 727.15.
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Olympus, which is engulfed in a $1.7 billion accounting scandal, was among the top weighted gainers on the Nikkei, up 3.3% to 1,270 yen, after a report it was considering an equity tie-up with candidate companies including Sony Corp and Panasonic Corp.
The camera and medical equipment maker said it was mulling various options for reform but nothing had been decided.
Mobile social gaming firm Gree Inc shed 3.5%, taking its losses to 13% since a report on Friday that Japan's consumer affairs agency may begin scrutinising internet games companies' fees. A Gree spokeswoman said there was no truth in the report.
Gree has fallen nearly 17% since the start of the year after rallying 156.7% in 2011 compared to a 17% decline for the benchmark Nikkei.
"The stock is being sold on this report, but it is also part of a broader adjustment for companies like Gree after last year's rally," a trader at a Japanese brokerage said.
Volume remained thin, with 1.39 billion shares changing hands on the main board, down from 1.67 billion on Wednesday.
Declining shares outpaced advancing issues 1,209 to 340.
"Many people are thinking that if there's even a small amount of profit, they'll close out right away instead of taking risks," said Fujio Ando, senior managing director at Chibagin Asset Management.