Japan's Nikkei average ended flat on Monday as gains in major banks were offset by falls in a number of exporters amid jitters over higher oil prices.
The Nikkei ended up 0.28 percent at 11,101.64 after hitting a two-week intraday high of 11,170.27. The broader TOPIX index gained 0.50 percent at 1,130.89.
Shares in Japan's "big four" banks - Mizuho Financial Group, Sumitomo Mitsui Financial Group (SMFG), Mitsubishi Tokyo Financial Group and UFJ Holdings - rose ahead of their annual results after the close.
Analysts said, however, uncertainty over oil prices was casting a pall over the market even after US crude slid further below the $40-a-barrel threshold in Singapore.
That followed weekend talks between oil producers and consumers in which Saudi Arabia said it wanted Opec to raise output by two to 2.5 million barrels a day.
The news came after the Organisation of Petroleum Exporting Countries (OPEC), following informal talks on Saturday, deferred a decision on an output increase until a full meeting on June 3.
"Caution arose towards the close as we are not sure if New York will gain further momentum on this news," said Koichi Seki, equity manager at Chuo Securities.
"Increased military tension in Iraq is also a worry as it could become an obstacle to the re-election of President Bush."
US President George W. Bush will deliver a prime-time speech later in the day as US public support for his Iraq policies stands at an all-time low.
Consumer electronics giant Sony Corp fell 1.01 percent to 3,920 yen and semiconductor chip-testing device maker Advantest Corp lost 1.73 percent to 7,400 yen.
Mitsubishi Motors Corp dropped 6.25 percent to 225 yen after the company's keenly awaited rescue plan, announced on Friday, failed to satisfy investors and prompted Goldman Sachs to lower its rating to "under-perform" from "in-line".
Trade volume increased to 1.284 billion shares, up from Friday's total of 1.180 billion which was the lowest daily total since February 26. Gainers outpaced decliners 949 to 515.
In the banking sector, Mitsui Trust Holdings, the smallest of Japan's seven top banks, rose 7.98 percent to 731 yen after it announced earnings that met the market consensus and triggered relief buying, analysts said.
A weekend newspaper report on state-led plans to turn around debt-ridden Kanebo Ltd helped support SMFG and the banking sector in general, analysts said.
SMFG is Kanebo's main creditor bank.
"Now that the (reported) value of banks' debt forgiveness to Kanebo has come in line with expectations, there is really nothing more to worry about on earnings in the banking sector," said Tsuyoshi Segawa, equity strategist at Shinko Securities.
The Nihon Keizai Shimbun said that a state-backed rescue body, the Industrial Revitalisation Corp of Japan (IRCJ), would ask SMFG and other creditors to forgive debt worth a total of 150 billion yen ($1.34 billion) to get rid of negative net worth and reduce capital at Kanebo before it becomes a major stakeholder.
Dampened by the possibility of a capital reduction, shares of Kanebo fell 7.75 percent at 131 yen.
Mizuho Financial rose 1.26 percent to 481,000 yen, SMFG gained 2.14 percent to 812,000 yen and Mitsubishi Tokyo Financial climbed 2.77 percent to 964,000 yen.
UFJ, the smallest of the top four banks, rose two percent to 612,000 yen before the bank posted a group net loss of 402.8 billion yen in the year ended on March 31 due to bad loan problems.
That compared with an estimated loss of 400 billion yen in a weekend report by the Mainichi Shimbun, but analysts said the loss had already been factored into its share price.
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