The benchmark Nikkei average <.N225> dropped 0.4% to 19,268.26 by the midday break, despite Wednesday's big rally on Wall Street.
The Dow Jones Industrial Average and the S&P 500 advanced 3.4% each, while the Nasdaq Composite gained 2.6% on hopeful signs the pandemic may be peaking and Bernie Sanders' decision to suspend his presidential campaign. [.N]
"It is a little premature to call an official peak in the outbreak, even if some optimism is warranted," said Esty Dwek, head of global market strategy at Natixis Investment Managers.
Japan recorded 503 new coronavirus infections on Wednesday, its biggest daily increase since the outbreak, underscoring the struggle of the authorities to contain the flu-like respiratory disease without imposing a mandatory lockdown.
The Nikkei's volatility index, a measure of investors' volatility expectations based on options pricing and considered to be a fear gauge, slid to as low as 38.85, its lowest level in more than two weeks.
"In my view, the recent fall in the volatility level does not reflect bullish sentiment. Rather, it reflects investors' reluctance to trade," said Yasuo Sakuma, chief investment officer at Libra Investments.
Indeed, overall activity was subdued, with the volume of shares traded on the main board valued at 1.04 trillion yen by the midday recess.
Bic Camera Inc tumbled 7.5% after the electronics retailer slashed its group profit forecasts for the current business year through August, citing the impact from the virus outbreak.
"We will look closely at earnings estimates as they are revised down. Markets may not be factoring in enough adjustment," said Natixis's Dwek.
The broader Topix fell 0.9% to 1,412.46, with all but four of the 33 sector sub-indexes on the exchange trading in negative territory.
Land transport <.IRAIL.T>, securities <.ISECU.T> and foods <.IFOOD.T> were the worst three performing sectors on the main bourse.
Startup and small-cap stocks bucked the market's overall weakness due to bargain hunting by retail investors, with the index of startup-heavy Mothers market climbing 2.4% and the small-cap Jasdaq index adding 1.0%.
(Reporting by Tomo Uetake; Editing by Jacqueline Wong)