While last week's US inflation report further stoked optimism that the Federal Reserve will cut interest rates at least once this year, traders became more cautious after Monday's rally.
The US central bank is expected to stay put on monetary policy Wednesday, but its post-meeting statement will be pored over in hopes of confirmation it will lower borrowing costs in September.
Boss Jerome Powell ramped up bets on a move earlier this month when he said officials did not need to see inflation hit their two percent target before cutting.
A string of figures indicating prices were under control and the labour market was softening have helped fuel confidence that easing is on the way, with some market-watchers suggesting there could be three cuts before January.
The release of figures on US jobs creation and openings is also in sight this week, which could have some impact on the bank's thinking.
The Fed gathering concludes hours after the Bank of Japan makes a much-anticipated decision, with speculation swirling over whether it will hike rates again, having lifted them for the first time in 17 years back in March.
BoJ chief Kazuo Ueda has been tight-lipped about what decision-makers will say, though he is expected to lay out a plan for winding down the bank's bond-buying, which has helped keep borrowing costs ultra-low for years.
But Katsutoshi Inadome, senior strategist at SuMi TRUST, said an interest rate move was unlikely just yet.
"A rate hike this month, combined with detailed plans to scale back Japanese Government Bond (JGB) purchases, would excessively disrupt the market, and cause yen appreciation which would hurt domestic equities," he warned in a commentary.
"The only situation in which a rate hike would appear the wisest course is if the yen weakens excessively.
"The reduction (in JGB purchases) is expected to occur in stages, considering the economic impact as well as the market's reaction."
He added that he did not expect "a clear outlook for interest rate hikes as (the bank) continues to assess the impact of bond purchase reduction but do expect an additional increase by October".
Bets on a Fed cut and BoJ cut have helped push the yen up against the dollar in recent weeks, having hit a nearly four-decade low close to 162 per greenback at the start of July.
With traders still uncertain, Asian equities fluctuated Tuesday, having enjoyed a healthy run-up the day before.
Hong Kong, Shanghai, Sydney, Seoul, Jakarta and Manila were all down, though Tokyo, Singapore, Taipei, Mumbai, Bangkok and Wellington edged higher.
London dipped as traders gear up for the Bank of England's policy announcement Thursday, with analysts split on whether it will cut rates or not.
Paris advanced following data showing the French economy expanded more than expected in the second quarter of the year, while Frankfurt also rose even after news that Germany's economy shrunk in April-June.
Markets had a rough ride last week after disappointing earnings from heavyweights Tesla and Google-parent Alphabet, which raised questions about the surge in tech giants that has helped power some indexes to record highs this year.
And investors are steeling themselves for more reports this week from other titans, including Microsoft, Facebook-parent Meta, Apple and Amazon.
Oil prices extended Monday's retreat on continued worries about demand owing to weakness in the Chinese economy, which overshadowed tensions in the Middle East after Israeli Prime Minister Benjamin Netanyahu vowed a "severe response" to a strike on the annexed Golan Heights that killed 12 children.
The warning came as diplomats raced to contain escalation between Israel and Iran-backed Hezbollah in Lebanon, which has been blamed for the attack.
Key figures around 0810 GMT
Tokyo - Nikkei 225: UP 0.2 percent at 38,525.95 (close)
Hong Kong - Hang Seng Index: DOWN 1.4 percent at 17,002.91 (close)
Shanghai - Composite: DOWN 0.4 percent at 2,879.30 (close)
London - FTSE 100: DOWN 0.4 percent at 8,256.74
Dollar/yen: UP at 154.92 yen from 154.00 yen on Monday
Euro/dollar: DOWN at $1.0819 from $1.0826
Pound/dollar: DOWN at $1.2852 from $1.2862
Euro/pound: UP at 84.18 pence from 84.14 pence
West Texas Intermediate: DOWN 0.3 percent at $75.59 per barrel
Brent North Sea Crude: DOWN 0.3 percent at $79.55 per barrel
New York - Dow: DOWN 0.1 percent at 40,539.93 (close)
