The Nikkei 225 closed down 0.9% at 70,035.71 points on Wednesday, with profit-taking following a sustained rally and weakness in financial shares acting as the main drag on the market.

Stocks had previously advanced quickly and pushed above the 70,000 mark, prompting some investors to lock in gains.

At the same time, high-valuation sectors such as electronics and semiconductors also came under pressure, with the Nikkei semiconductor stock index falling more than 2% at one point during the session.

Japanese institutional investors tend to take profits after the end of the first half of the fiscal year.

External markets also added some pressure. The three major U.S. stock indexes hit record highs overnight, but U.S. Treasury yields moved higher again, with the 10-year yield rising above 5.3% at one point. Oil prices climbed above $100 per barrel on Middle East tensions and supply concerns.

The yen hovered around 158 per dollar, while investors also awaited the minutes of the Federal Reserve meeting.

Overall, Japanese stocks remain at elevated levels in the short term, but divergences have clearly widened after the recent string of gains, and weakness in financial shares also suggests that funds are becoming more cautious.