As tourism related equities plummeted following China's warning to its nationals not to visit to Japan amid a growing diplomatic conflict over Taiwan, Japan's Nikkei share average closed marginally lower on Monday.
After climbing as much as 0.4% earlier in the morning, the Nikkei ended the afternoon 0.1% lower at 50,323.91. At 3,347.53, the overall Topix dropped 0.37%.
China advised Chinese nationals not to travel to Japan on Friday and threatened Tokyo with a "crushing" military loss if it intervened over Taiwan.
Since Japanese Prime Minister Sanae Takaichi stated earlier this month that a Chinese attack on Taiwan may constitute a "survival threatening situation" and prompt a possible military reaction from Tokyo, tensions between Beijing and Tokyo have escalated.
Chinese visitors, who spend a lot of money on apparel and cosmetics, are a major source of revenue for Japanese businesses.
Department store stocks dropped, with Isetan Mitsukoshi Holdings down 11%. Shiseido, a manufacturer of cosmetics, dropped 9.08%, while Takashimaya lost 6.18%. Fast Retailing, the owner of the Uniqlo brand, fell 5.29% to become the Nikkei's largest drag.
"The market's response to those stocks was a bit excessive. According to Shoichi Arisawa, general manager of IwaiCosmo Securities' investment research division, "investors may have priced in all the bad news regarding the relationship between China and Japan."
"I do not think the sell off of those stocks would continue." Technology stocks increased as investors snatched up semiconductor and artificial intelligence related equities on dip, providing some market assistance.
Tokyo Electron, a manufacturer of chip making equipment, increased 4.55% to become the Nikkei's largest supporter. SoftBank Group saw a 2.83% increase.
Data center materials manufacturer Mitsui Kinzoku had an 8.87% increase. The second-largest banking group in the nation reported a 57% increase in July-September quarter net profit on Friday, which caused Sumitomo Mitsui Financial Group to jump 4.57%.
Despite reporting greater quarterly net earnings, Mitsubishi UFJ Financial Group and Mizuho Financial Group saw declines of 1% and 0.26%, respectively.
