The dollar hit 109.36 yen, its lowest since last November, as geopolitical fears fed a rush to safety.

North Korea warned on Tuesday of a nuclear attack on the United States at any sign of aggression, as a U.S. Navy strike group steamed toward the western Pacific - a force President Donald Trump described as an "armada".

Trump said in a Tweet that North Korea was "looking for trouble" and the United States would "solve the problem" with or without China's help.

"The Japanese market will likely stall for a while," said Hiroyuki Nakai, chief strategist at Tokai Tokyo Research Centre.

Nakai said hopes that Japanese companies could post double-digit profit gains this fiscal year helped by November's dollar-yen rally when Trump was elected have faded.

"Such expectations have receded, so it has become difficult to see the Nikkei's price to earnings ratio rise," Nakai said.

Japanese companies are scheduled to release later this month their earnings for the full year ended March 2017 and forecasts for the current fiscal year.

Exporters, whose overseas profits shrink when the yen strengthens, lost ground.

Automakers dropped 2.0 percent, with Toyota Motor Corp, Honda Motor Co and Nissan Motor Co all falling between 1.4-2.0 percent.

Financial shares were also hit. Mitsubishi UFJ Financial Group dropped 2.0 percent, Mizuho Financial Group shed 1.3 percent and Nomura Securities declined 1.9 percent.

Elsewhere, Toshiba Corp fell as much as 3.6 percent after it filed twice-delayed business results on Tuesday without an endorsement from its auditor and warned its very survival was in doubt.

The broader Topix dropped 1.2 percent to 1,477.79, with all of its 33 subsectors falling.

The JPX-Nikkei Index 400 shed 1.1 percent to 13,225.17.

(Reporting by Ayai Tomisawa; Editing by Eric Meijer)