Japan's Nikkei average slipped 0.8% on Thursday, reversing the previous session's sharp gains as investors avoided risk ahead of a closely watched Spanish bond auction later in the day.
Nippon Sheet Glass was one of the top percentage losers on the main board, shedding 7% after its American executive quit following "fundamental disagreements" with the company's board on strategy.
The stock was traded three times as much in the session than its average 90-day volume.
Also falling in high volumes were industrial robot maker Fanuc Corp, Sony Corp and Honda Motor Co , down between 0.9 and 1.2%.
The benchmark Nikkei fell 78.88 points to 9,588.38 after a 2.1% rally in the previous session, but still managed to end above its 13-week moving average near 9,577.
"The market is waiting to see what happens tonight with the Spanish bond auction as well as earnings reports and housing sales statistics from the United States," said Masayuki Doshida, senior market analyst at Rakuten Securities.
Spain is due to sell up to 2.5 billion euros of two- and 10-year bonds later in the day after drawing stronger-than-expected demand for shorter-dated debt earlier this week.
The country reignited concerns over the euro zone financial crisis this week after the yield on its benchmark 10-year government bond climbed above 6% and the cost of insuring its debt against default spiked to a record high on Monday.
"There are no positive factors right now. We're not seeing particularly strong data that suggests a robust economy in the U.S., corporate results are mixed, and we're not seeing anything that suggest demand from China is growing," said Ryota Sakagami, chief equity strategist at SMBC Nikko Securities.
Despite the resurging fears over Europe, strategists said there was firm appetite for companies that are likely to post strong earnings this fiscal year.
"Long-only investors say their portfolios are performing well because I think the market is shifting from one that sees even tattered stocks rise to one that is far more selective based on value and earnings outlook," said Sakagami.
The weaker yen, with the dollar last traded at 81.44 yen, also underpinned sentiment on Thursday and helped major exporters Toyota Motor Co and construction machinery maker Komatsu Ltd outperform the index with gains of 0.9 and 0.5% respectively.
The broader Topix eased 0.6% to 814.13.
Trading volume was thin, with 1.63 billion shares changing hands on the main board, slipping slightly from 1.67 billion on Wednesday.
Going up?
The Nikkei has lost 4.9% so far in April, after soaring more than 19% in the first quarter.
But Nomura wrote in a note to clients on Thursday that a correction since March 27 was about to end, saying that the Nikkei was entering a rebound and heading towards its 25-day moving average near 9,864.
The broker said if the index regained its 25-day average, it could attempt a move back above 10,000.
But market participants said the Bank of Japan's meeting on April 27 was unlikely to provide any catalyst to jolt the benchmark higher.
"It's obviously no longer a surprise if they act. It would be a negative surprise if they didn't and it would be in line if they do step up asset buying," said Sakagami at SMBC Nikko.
Bucking the overall trend, Yamaha Motor Co Ltd jumped 2.9% after JP Morgan raised its price target on the company, saying it expected January-March results to be strong.
JP Morgan also lifted its price target on Hitachi Ltd, which rose 2.5% and topped the main board as the heaviest traded stock by turnover.
