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Traders also expressed concern over the prospect of a messy Greek debt default amid hopes talks in Europe could help deal with the issue, reports Reuters.
Mitsubishi Electric lost 14.8 per cent and endured heavy trade after the Japanese defence minister suspended dealings with the electronics company, which he accused of overcharging for its services.
Fujio Ando, senior managing director at Chibagin Asset Management, said the news had affected the market.
"Earnings results for major exporters and high-tech firms were obviously hit by Thai floods and their forecast cuts were inevitable and expected," added Mr Ando.
The benchmark Nikkei 225 fell 0.5 per cent to 8,793.05 in its third consecutive day of losses after stretching to a three-month high late last week.
Bloomberg noted the lack of expansion in the US economy has also had a role in damaging the Nikkei's value.
Posted by Greg Secker
