The Nikkei Index concluded trading down 0.2%, finishing at 56,806.41 points, pressured by declines in banking stocks.

On Monday, Asian stock markets quietly consolidated their recent significant gains amid thin trading due to the Lunar New Year holiday, while disappointing economic data from Japan cooled the thriving market.

Markets in China, South Korea, and others were closed for the holiday. Trading in currencies and bonds was subdued, and precious metals faced renewed selling pressure.

Japan reported that its economy grew at an annualized rate of just 0.2% in the December quarter, a disappointing figure significantly below the expected 1.6%, as government spending weighed on economic activity. The weak data underscores the challenging tasks ahead for Prime Minister Takachi and supports her push for more aggressive fiscal stimulus.

Koichi Sugisaki and Hiromu Uezato, strategists at Morgan Stanley MUFG, stated in a report that the recent flattening trend in the long end of the Japanese Government Bond (JGB) yield curve is unlikely to persist. They noted that the market has fully priced out the term premium related to concerns that the new government might expand fiscal spending. The strategists added, "Given that the recent rally in long-term JGBs has been primarily driven by valuation-sensitive offshore investors, we anticipate some profit-taking around current levels." They also suggested the market might be considering whether the US government intends to influence the Takachi administration to place greater emphasis on fiscal discipline, due to concerns that any sharp spike in Japanese interest rates could have adverse effects on the US Treasury market.