Japan's Nikkei stock average edged down on Tuesday, snapping a four-day winning streak, with investors selling Olympus Corp on disappointing earnings and cashing in recent winners such as Komatsu Ltd after the index rose to its highest intraday level in 13 months.
Traders said the Nikkei's rise to a new 2005 high, just inches away from the psychologically important 12,000 mark, prompted profit-taking, as investors fretted about the government's future if pending postal reform bills are not passed.
However, growing confidence in Japan's economic outlook provided support, said Terushi Hirotama, head of trading at Ichiyoshi Securities.
"I don't think the Nikkei will fall too much from this level. It's still within shooting distance of the 12,000 mark and will likely top that level once political stability is confirmed," he said.
Prime Minister Junichiro Koizumi has said rejection of the bills would be tantamount to a vote of no-confidence, a tacit threat to call an election for parliament's powerful lower house.
An election would likely hurt stocks as it raises the possibility of the ruling party losing power, stalling policy.
Chip-related issues such as Tokyo Electron Ltd gained, however, on growing optimism about the chip sector's outlook, and telecoms firm KDDI Corp extended its recent advance.
The Nikkei lost 6.72 points to 11,940.20, snapping a four-day rise in which it gained 1.78 percent. Earlier, it climbed to 11,982.20, its highest intraday level since July 1, 2004. The broader TOPIX index fell 0.2 percent to 1,209.19, also ending a four-day rise.
Construction machinery maker Komatsu fell 4.3 percent to 1,078 yen. The stock had gained 17 percent since last Thursday, when it posted an 84 percent jump in quarterly net profit and forecast a bigger annual profit.
Shares of Olympus, the world's fourth-largest maker of digital cameras, fell 2.9 percent to 2,200 yen, becoming the third-biggest contributor to the Nikkei's fall, after it posted a 62 percent drop in net profit in the April-June quarter due to losses in its digital camera operations.
But Tokyo Electron jumped 1.8 percent to 6,250 yen. Advantest Corp, the world's top maker of semiconductor testing devices, rose 1.7 percent to 9,160 yen, its highest close since February 18.
Analysts attributed the rise in chip stocks to an industry group report that showed a 0.8 percent gain in world-wide chip sales in June from a year earlier. The Semiconductor Industry Association also said on Monday that chip sales were up 6.5 percent in the first half of the year, and forecast even stronger growth in the second half.
Trading was active, although volume fell slightly from Monday's level. About 1.74 billion shares changed hands on the Tokyo bourse's first section compared with 1.83 billion on Monday. Decliners outpaced advancers 1,074 to 446.
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