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The boost to the index over the last three days came about in part due to the pledges made by leaders in Europe to find a solution to the debt crisis by the end of the month.
On October 10th, the Nikkei rose by two per cent as investors exhibited greater confidence following the announcement by European leaders.
However, the latest dip comes after US firm Alcoa failed to meet analysts' earnings estimates, which was taken as a sign that the US economy is starting to slow.
Kenichi Hirano, operating officer at Tachibana Securities, told Reuters: "Investors took it as bad news that the company clearly felt the impact of slowing growth."
This was reflected in the performance of gaming firm Nintendo, the shares of which declined by 2.5 per cent as nearly 40 per cent of its sales come from the Americas.
Posted by Greg Secker
