Nikkei slips, turns bearish on Greece fears

The benchmark index slipped to 9.055.16, while the broader Topix index fell 1.3 percent to 766.6.

Investors shied away from riskier assets after Greece's leftist candidate for prime minister, Alexis Tsipras, said bailouts must be rejected for a new coalition to form after Sunday's election, which would threaten Europe's fiscal health.

"The market as a whole will be in risk-aversion mode due to the problems in Greece," said Masayuki Doshida, a senior market analyst at Rakuten Securities.

The real-estate sector performed particularly badly, dropping 2.9 percent as market participants played it safe amid the uncertainty surrounding the euro zone.

"The market is worried that the austerity pact engineered by Sarkozy and Merkel will crumble, so the yen is strengthening against the euro again," said Fumiyuki Nakanishi, general manager of investment and research at SMBC Friend Securities.

"No one can see a way out of this situation, and unless European leaders come to an agreement at the next G8 meeting, the market is going to remain on edge."

Weighing on the market was Gree Inc, which slid a further 6.5 percent on top of sharp losses incurred since Monday's report that Japan's regulatory agency could outlaw online games with gambling aspects. It was the most heavily traded stock by turnover on the main board.

Gree, Japan's leading social gaming site, said on Tuesday that it will strengthen policing of its content.

Market participants said investors would be selectively buying shares of companies who have given good guidance recently.

Toshiba Corp's share price was pumped up 1.6 percent after the company forecast an operating profit of 300 billion yen for the current financial year after the bell on Tuesday. A preview report in the Nikkei business daily propelled the stock up 2.9 percent during the session.

Panasonic also soared 4.7 percent after the Nikkei daily said it could forecast a net profit of around 50 billion yen for the year ending March 2013, boosted by structural reforms.

More than 60 percent of the 83 Nikkei companies that have reported January-March earnings so far beat or met market expectations, but this positive news has so far failed to drive the Nikkei up to the 10,000 level seen in the first quarter.

Concerns that the U.S. recovery may be faltering as well as worries about slower growth in China and instability in the euro zone have dragged the Nikkei average down 10.2 percent in the second quarter after it rallied more than 19 percent in the first.