The Nikkei <.N225> fell 0.3 percent to 23,798.90, staying slightly below its 26-year high of 23,951.61.

Index-heavy stocks such as chip equipment maker Tokyo Electron (>> Tokyo Electron Ltd) tumbled 2.0 percent and clothing store operator Fast Retailing (>> Fast Retailing Co Ltd) shed 0.8 percent, contributing 30 negative points together to the Nikkei index.

The broader Topix <.TOPX>, however, was up 0.1 percent to 1,891.22.

Financial stocks, which invest in higher-yielding products such as foreign bonds, were higher, with the insurance sector <.IINSU.T> rising 1.6 percent and the banking sector <.IBNKS.T> adding 1.5 percent.

Yields on the 10-year U.S. Treasury note reached a 10-month high on Tuesday, after the Bank of Japan said it will trim its purchases of Japanese government bonds and U.S. corporate debt.

Dai-ichi Life Holdings (>> Dai-ichi Life Holdings Inc) soared 2.5 percent, T&D Holdings (>> T&D Holdings Inc) added 1.4 percent, Mitsubishi UFJ Financial Group (>> Mitsubishi UFJ Financial Group Inc) advanced 1.4 percent and Mizuho Financial Group (>> Mizuho Financial Group, Inc.) gained 1.0 percent.

(Editing by Sam Holmes)