Japan's Nikkei share average slipped 0.2 percent on Monday as investors took profits on blue chip companies like Honda Motor Co following a rally in the previous session, but buying in small-cap shares limited losses. A US interest rate rise last week also kept the market in check, as assets such as US bonds looked more attractive. "Credit tightening in the US will diminish investors' ability to take risks and that's certainly not good for the Japanese stock market," said Akio Yoshino, general manager at Societe General Asset Management. Yoshino noted that a downgrade of General Motors Corp's and Ford Motor Co's debt to junk status also made investors wary of risk.
The Nikkei closed down 20.85 points at 11,171.32. The benchmark had added 190.06 points or 1.73 percent to 11,192.17 on Friday, the biggest one-day gain this year.
Selling pressure mounted with the Nikkei hovering at around 11,200, where the 200-day moving average stands, traders noted.
The broader TOPIX index inched up 0.15 percent to 1,152.48.
Investors cashed in on Japan's No 3 automaker Honda, which lost 1.3 percent to 5,160 yen, while Toyota Motor Corp fell 0.8 percent to 3,900 yen.
Technology shares were down with Sony Corp down 0.3 percent at 4,030 yen and Sharp Corp falling 0.2 percent to 1,666 yen.
Earnings, in particular dividends, dictated the fate of some issues.
"Right now, the talk of the market is 'dividend increases, dividend increases'," said Ken Masuda, senior dealer in equities at Shinko Securities.
Yamada Denki Co, a major retailer of home electronics, jumped 9 percent to 5,670 yen after it raised its annual dividend forecast to 21 yen from a previous 11 yen. That compared with 12 yen a year earlier.
KDDI Corp, Japan's No 2 telecoms operator, added 0.2 percent at 498,000 yen, after the Daiwa Institute of Research cited a management plan to increase returns to shareholders.
Similar moves are spreading among Japanese firms as a way to ward off unwelcome take-over attempts, especially after Internet firm Livedoor Co waged a rare and bitter hostile take-over battle against Fuji Television Network Inc.
Japan Airlines Corp (JAL) dropped 1 percent to 297 yen after Asia's biggest airline said fuel costs and a new accounting method would hit its profits this year.
While large-cap shares slipped, some small-caps were sought after.
Kyosan Electric Mfg. Co, which makes railway signals and road traffic control systems, soared 13.8 percent to 429 yen and rival Nippon Signal Co Ltd jumped 7.5 percent to 657 yen.
Kyodo news agency reported on Sunday that Japan's land and transport minister said railway companies should install new automatic train stopping systems to avoid crashes like one earlier this month that killed 107 people.
The Nikkei Jasdaq average rose for the eighth consecutive day to close up 0.5 percent at 1,996.13, the highest since July.
Trading volume edged up, with 1.42 billion shares changing hands on the Tokyo bourse's first section, the highest in the three days of trading since April 28. Advancers outnumbered decliners 1,031 to 486.
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