Japanese stocks wobbled on Wednesday morning as tech shares were dragged down by falls in their US counterparts overnight, while financials rallied on the back of rising US yields.

The Nikkei share average shed 0.2 per cent to 20,181.62 in midmorning trade, while gains in banking stocks and insurers supported the broader Topix, which tacked on 0.1 per cent.

US Benchmark 10-year notes dropped 18/32 in price to yield 2.20 per cent overnight, up from 2.14 per cent late on Monday after Fed Chair Janet Yellen said that it is appropriate to gradually raise rates. “Yellen's comment is supporting Japanese financial stocks today, and for the long-term, Japanese stocks are on the rising trend supported by US-led global economic recovery,” said Mutsumi Kagawa, chief global strategist at Rakuten Securities.

Banks and insurers, which invest in higher yielding products such as foreign bonds, surged 1.8 per cent and 1.4 per cent, respectively. Mitsubishi UFJ Financial Group gained 2.1 per cent, Mizuho Financial Group soared 2.6 per cent and Dai-ichi Life Holdings advanced 2.2 per cent.

Traders said overall sentiment was subdued as investors remain cautious after a healthcare bill was delayed in the US Senate, raising fresh questions about President Donald Trump's domestic agenda. “The news raised worries on overall sentiment and makes it hard for the market to take a firm direction,” said Takuya Takahashi, a strategist at Daiwa Securities.

Tech shares languished after a sell-off in big tech names on the Nasdaq, which tumbled 1.6 per cent. Google parent Alphabet fell 2.5 per cent after EU antitrust regulators hit the tech giant with a record $2.7-billion fine. Tokyo Electron Ltd shed 2.0 per cent, Advantest Corp declined 1.2 per cent and Alps Electric Co dropped 1.1 per cent.

The JPX-Nikkei Index 400 advanced 0.2 per cent to 14,422.02.

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