Washington began imposing 15% tariffs on a variety of Chinese goods on Sunday, while Beijing started imposing new duties on U.S. crude oil on the same day.

The Nikkei stock average ended down 0.41% at 20,620.19 points.

"While the latest activation of tariffs between the United States and China is not a positive development, it was not a surprise and the market's losses were limited as a result," said Sochiro Monji, senior strategist at Sumitomo Mitsui DS Asset Management.

Japanese manufacturing activity declined for a fourth straight month in August amid flagging demand, a revised business survey showed on Monday.

There were 67 advancers on the Nikkei index against 151 decliners.

Shares of companies with a strong presence in China retreated.

Construction machinery maker Komatsu Ltd declined 0.2%, robot manufacturer Fanuc Corp lost 0.5% and bathroom and kitchen fixture maker TOTO Ltd retreated 0.7%.

Oil and natural gas developers Inpex and Japan Petroleum Exploration Co each lost 1.7%, respectively, hurt by a sharp drop in crude oil prices. Refiner Idemitsu Kosan  was down 0.7%.

Shipping companies, on the other hand, gained thanks to a rise in the Baltic index, which tracks rates for ships ferrying dry bulk commodities, to a nine-year peak.

Nippon Yusen KK edged up 0.4%, Kawasaki Kisen Kaisha added 1.7% and Mitsui OSK Lines was up 0.9%.

The broader Topix shed 0.44% to 1,505.21.

The volume of shares traded on Topix was 0.71 billion, compared to the average of 1.11 billion yen in the past 30 days.

The top underperformers among the top 30 core Topix names were Central Japan Railway Co which lost 2.1%, followed by Shin-Etsu Chemical Co which fell 1.7%.

The stocks that gained the most among the top 30 core Topix were Astellas Pharma Inc, which rose 2.6% and Takeda Pharmaceutical Co, which climbed 1.6%.