TOKYO: The Nikkei average fell on Tuesday to hover just above 8,500 as rising bond yields in Italy and other euro zone nations with market players saying the index was unlikely to push higher amid concerns about Europe ability to contain its debt crisis.
But Sumitomo Mitsui Financial Group climbed on plans for a share buyback while scandal-hit Olympus Corp remained overwhelmed by buy orders for a second session in a row on hopes that the Tokyo bourse will not delist its shares.
Relief about the appointments of new leaders in Italy and Greece was quickly overtaken by worries about Italian bond yields near record highs and benchmark yields in France and Spain closing near session highs.
"Japan, like the rest of the world, is focused on Europe, and rangebound trade will continue until investors are reassured that the situation there is more stable," said Mitsushige Akino, chief fund manager at Ichiyoshi Investment Management.
The Nikkei average fell 0.8 percent to 8,534.66, holding above 8,500 throughout the session but giving back much of the previous day's gains. The broader Topix index lost 0.7 percent to 730.55.
"The uptick (in the Nikkei) yesterday was a result of traders buying back shares they sold last week, not taking new long positions. It's too early to be optimistic," said Seiki Orimi, senior investment strategist at Mitsubishi UFJ Morgan Stanley Securities.
Some 930 million shares changed hands on the main board, on track to fall short of Monday's full-day total of 1.41 billion shares and last week's average volume of 1.74 billion shares.
The Nikkei's 25-day moving average of 8,750 is a key resistance point, strategists say, with the benchmark needing to rise above that level before investors become confident that stocks can resume an uptrend.
OLYMPUS UNTRADED, SMFG CLIMBS
Olympus was notionally quoted up at 640 yen, up by its daily limit of 100 yen, 18.5 percent above Monday's close.
Shares of Japan's three largest banks diverged following their reporting of earnings results late on Monday.
No.3 lender Sumitomo Mitsui Financial Group climbed 1.8 percent, after it said it will buy back up to $650 million worth of its shares, or 1.6 percent of its outstanding stock. SMFG was the heaviest-traded issue by turnover.
Mitsubishi UFJ Financial Group added 0.3 percent, and Mizuho Financial Group was flat.
Profit in the April-September first-half fell 25 percent at Mizuho and SMFG, but MUFG's profit jumped 95 percent, boosted by a hefty one-off gain from converting preferred shares in Morgan Stanley, in which it now holds a 22 percent stake.
MUFG and SMFG raised their full-year profit forecasts as some analysts had expected, while Mizuho kept its forecast.
Elpida Memory Inc tumbled 8.5 percent and was the third-biggest percentage loser on the main board.
Japan's biggest maker of DRAM chips has lost more than 30 percent of its value since Oct. 27, when it posted a quarterly operating loss on weak demand for PC chips. Massive flooding in Thailand has interrupted the hard disk drive supply chain and slowed production, which has further pressured DRAM prices already suffering from weak demand and overcapacity.
Nisshin Steel Co shed 6 percent and Nippon Metal Industry Co fell 5.1 percent after they denied on Monday a report they were in talks to merge their operations. Trade in the two companies had been suspended for much of Monday afternoon after the report.
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