The 225-issue Nikkei Stock Average dropped 164.28 points, or 0.61 percent, from Friday to close the day at 26,821.52.
The broader Topix index, meanwhile, lost 7.15 points, or 0.38 percent, to finish at 1,889.64.
Local brokers said the U.S. Nasdaq's retreat late last week set a negative tone for trade early on, although the yen's retreat against the U.S. dollar gave exporters a momentary boost.
Dealers here also said that losses were capped by some investors opting to bag stocks of firms likely to post robust profits henceforth.
"Overseas investors sold Japan's big technology stocks after the Nasdaq lost more than 1 percent on Friday, which pushed the Japanese market down," Shigetoshi Kamada, general manager at the research department at Tachibana Securities, was quoted as saying.
"But losses were limited as domestic investors bought stocks on optimism that profits of Japanese technology companies might rise," Kamada said.
Ongoing uncertainty about the Fed's moves kept investors in limbo, strategists here said, with concerns rife about both monetary tightening to deal with long-term inflation, as well as the frequency of future rate hikes.
"Investors were concerned that the U.S. Federal Reserve may potentially become more aggressive in its monetary tightening amid growing fears about long-term inflation and the pace of interest rate hikes," Makoto Sengoku, senior equity market analyst at Tokai Tokyo Research Institute, was quoted as saying.
By the close of play, precision instrument, electric appliance, and information and communication issues led decliners on the Prime Market, while issues that declined outpaced those that rose by 1,189 to 600, with 50 ending the day unchanged.
Tech shares dragged down by their U.S. peers included Advantest losing 1.8 percent, while Tokyo Electron closed down 0.6 percent.
Nikkei heavyweight and tech startup investor SoftBank Group weighed on the broader market, dropping 2.7 percent, while Sony Group slumped 3.9 percent.
Medical services platform M3 tumbled 5.3 percent, while air-conditioner maker Daikin Industries dropped 2.8 percent by the close.
Uniqlo casual clothing chain store operator, Fast Retailing, another Nikkei heavy-hitter dragged the market down, losing 2.7 percent.
Tokyo Electric Power Company Holdings, found favor, however, surging 16.2 percent, after Japanese Prime Minister Fumio Kishida suggested recently Japan's energy supply would seek to rely more on renewables and nuclear power.
Renewable energy company Renova, subsequently, added 3.1 percent by the close and Chubu Electric Power climbed 7.4 percent.
On the Prime Market on Monday, 1,148.89 million shares changed hands, dropping from Friday's volume of 1,270.96 million shares.
The turnover on the first trading day of the week came to 2,501.48 billion yen (19.95 billion U.S. dollars).
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