Japanese shares have opened flat despite overnight gains in Europe and the United States on hopes that the European Central Bank (ECB) may soon take action to ease the continent's debt crisis.
The Nikkei index at the Tokyo Stock Exchange on Tuesday opened 0.05 per cent or 4.59 points lower at 8,721.70. The Topix index of all first section shares was off 0.01 per cent or 0.06 points at 735.67.
"Overall risk aversion has lessened, as illustrated by appetite for stocks globally, which should offset the yen's gains somewhat," said Hiroichi Nishi, general manager of equities at SMBC Nikko Securities.
The dollar stood at Y78.18, compared with Y78.20 in New York on Monday.
The euro, meanwhile, traded at $US1.2389 and Y96.85, compared with $US1.2399 and Y96.97 in New York.
US stocks scored moderate gains on Monday on expectations of action by the ECB.
The Dow Jones Industrial Average closed up 0.16 per cent, or 21.34 points, at 13,117.51.
The tech-rich Nasdaq rose 0.74 per cent, or 22.01 points, to 2,989.91, while the S&P 500, a broad measure of the markets, climbed 0.23 per cent, or 3.24 points, to 1,394.23.
But Tokyo analysts voiced worries that political uncertainty in Japan was weighing on local stocks, with the opposition threatening a no confidence motion against Prime Minister Yoshihiko Noda.
The main opposition Liberal Democratic Party has demanded Noda promise a snap election in exchange for supporting a bill on tax hikes in parliament.
"Political uncertainty is negative," said Kenichi Hirano, operating officer at Tachibana Securities.
"If the government is seen as ineffective in producing appropriate fiscal and monetary policy due to political chaos, speculation may emerge the government may not be able to curb the yen's strength," he said.