The Nikkei share average fell 0.86% to 21,521.53 as investors cautiously awaited the U.S. Federal Reserve's policy decision later in the day.
For the month of July, the benchmark eked out a 1.2% gain.
As a new round of U.S.-China trade negotiations started in Shanghai, Trump warned China against waiting out his current presidential term before finalising a trade deal.
With Japan's earnings season in full swing, reactions to individual earnings results dominated trading.
Sony Corp soared 5.3% after the company surprised the market on Tuesday by reporting a record first-quarter operating profit despite the slowing gaming business, as strong demand for multiple-lens camera systems for smartphones boosted sales of image sensors.
Denso Corp shed 3.4% after the auto-parts maker reported during the session that the company's operating profit for the April-June quarter fell 23.9%, although analysts forecasted a 20.2% rise.
Another car parts supplier Aishin Seiki Co dipped 2.6% after the company cut its profit forecast for the year through March.
Nintendo Co fell 1.2% after the game maker reported its operating profit fell 10% in the three months to June, below market expectations, despite stronger sales of its Switch console.
Konica Minolta Inc tumbled 11.4% after the manufacturer of copy machines and other products posted an unexpected net loss in the three months to June.
Sumitomo Mitsui Trust Holdings dropped 3.7% and Sumitomo Mitsui Financial Group retreated 1.0% as both financial groups reported falls in first-quarter profits.
Bank shares fell 1.2% as the sector struggles with low interest rates and weak fund demand, with top regional banking group Concordia Financial Group slipping 1.3% and Shizuoka Bank dipping 1.2%.
Analysts say Bank of Japan governor Haruhiko Kuroda's comments on Tuesday that he is ready to deploy further stimulus if necessary weighed on regional banks.
Decliners outnumbered advancers but there were some bright spots in earnings.
Anritsu Corp climbed 4.1% after the leading 5G testing systems provider reported better-than-expected 65.3% growth in operating profits.
Zozo Inc jumped 11.0% after the online fashion retailer posted stronger-than-expected quarterly profits.
More companies including Panasonic Corp, Murata Manufacturing Co, Takeda Pharmaceutical Co and Japan Tobacco Inc are due to announce earnings after the market close on Wednesday.
The broader Topix lost 0.66% to 1,565.14. Turnover on the Tokyo Stock Exchange's main board rose to 2.67 trillion yen, its highest in 5-1/2 weeks, due in part to rebalancing of investor portfolios as the Nikkei's components are reshuffled.
Bandai Namco Holdings will join the Nikkei average, replacing Chiyoda Corp on Thursday.