Some investors locked in profits after the recent rally and ahead of Japan's mid-year earnings season, analysts said.
On Wednesday, Wall Street stocks lost ground after soft US retail data, in a potential sign that manufacturing-led weakness could be spreading to the broader economy. A solid start to the earnings season helped counter losses, but that was partly because markets had already marked down expectations.
As Britain and the European Union scrambled to secure a last-minute Brexit deal, investors digested mixed headlines on the likelihood of progress at a EU leaders summit in Brussels later on Thursday.
Japanese chip-related stocks fell, taking their cue from Wall Street peers as well as Dutch ASML, which dropped 4.5% as investors took profits after the semiconductor equipment maker announced better-than-expected results on Wednesday.
Tokyo Electron dropped 0.6% and Screen Holdings slid 1.4%.
Murata Manufacturing climbed 1.1% after its chief executive Tsuneo Murata told the Nikkei business daily that the electronic components market was bottoming out, stirring hopes that the industry may be emerging from a year-long slowdown.
Subaru fell 0.5% after the carmaker said it would suspend production at its Gunma factory until October 24 due to supply disruptions caused by Typhoon Hagibis.
Elsewhere, commodity-related sectors fared worse. The non-ferrous metal and the iron and steel were among the worst performers in the Tokyo bourse's 33 subsector indexes, down 1.0% and 0.9%, respectively.