The Nikkei average ended down 0.37 percent on Wednesday after topping 15,000 for the first time in nearly five years, but foreigners' appetite for Japanese stocks and economic optimism are expected to keep its upward momentum intact.
Advantest Corp and other recent gainers dropped but analysts said technology shares could keep rising if their US counterparts remained firm.
Investors also cashed in on banks and steel stocks, with top lender Mitsubishi UFJ Financial Group Inc falling 2.6 percent to 1.51 million yen.
Akio Yoshino, general manager at Society General Asset Management, said stocks already looked overvalued but some investors appeared confident that upcoming earnings would be strong enough to justify high prices.
"As long as there are investors who expect earnings to grow, the market will go higher," said Yoshino, adding that the Nikkei looked ready to advance as high as 15,500.
Also supporting the market was aggressive buying by foreign investors.
They have scooped up a net 9.44 trillion-yen ($78.84 billion) of Japanese stocks so far this year, surging past the previous record of 9.13 trillion yen set in 1999.
Yaps Yabe, sales director at Meiwa Securities, said foreign buying tended to slow in December as US pension and hedge funds closed their positions ahead of Christmas.
But this year, he said, Japanese stocks could keep heading north as new types of investors were coming into the market, such as those who have benefited from oil price rises and funds elsewhere in Asia.
The Nikkei turned negative in the last trading hour to finish down 55.55 points at 14,872.15.
It rose to 15,013.24, climbing above 15,000 for the first time since December 14, 2000. The broader TOPIX index slipped 0.54 percent, or 8.36 points, to 1,536.21.
It rose to 1,553.27, its highest intrude level since July 2000. In the technology sector, Advantest, the world's biggest maker of microchip-testing devices, lost 3 percent to 10,900 yen.
It hit a three-year high of 11,640 yen on Monday. Matsushita Electric Industrial Co Ltd fell 1.8 percent to 2,415 yen after hitting a four-year intrude high of 2,515 yen last week.
The technology sector rose about 13 percent this month, leading the Nikkei's latest gains. Kazuhiro Takahashi, a general manager at Daiwa Securities SMBC, said it remained to be seen whether tech stocks would continue to lead the pack.
Steel stocks, which had drawn buyers due to their relatively high dividend ratios, were sold. Nippon Steel Corp, the world's third-biggest steel maker, was down 0.5 percent at 408 yen.
Investors flocked to firms seen as having profit potential such as Shin-Etsu Chemical Co Ltd, which rose 1.8 percent to 6,230 yen after Merrill Lynch raised its share price target for the world's largest silicon wafer maker.
Murata Manufacturing Co Ltd gained 3.5 percent to 6,840 yen. UBS analyst Fumihide Goto upgraded the stock to "buy 2" from "neutral 2" in a report dated on Tuesday, saying he expected a stronger performance from late 2006.
Trade hit its most active level since on Monday last week, with 2.44 billion shares changing hands on the Tokyo exchange's first section. Decline's beat advancers 859 to 713.