The Nikkei average edged up 0.04 percent to end at its highest in six sessions on Monday as commodities-related shares such as Mitsui & Co and Sumitomo Metal Mining Co on soaring oil prices. But department store chains Takashimaya Co and Mitsukoshi Ltd fell on weaker earnings, and property firms declined after the Bank of Japan's quarterly tankan survey of corporate sentiment showed the sector was less optimistic about the coming three months.
"The Nikkei opened down after a weak finish in New York last week, but with the tankan bringing no major surprises, it lacked reasons for a further sell-off and picked up in the afternoon," said Masaru Hamasaki, senior strategist at Toyota Asset Management.
The Nikkei closed up 7.94 points at 18,146.30. The broader TOPIX index rose 0.31 percent to 1,780.36. Trade was moderate, with about 1.77 billion shares changing hands on the first section of the Tokyo Stock Exchange, nudging up from 1.74 billion on Friday. Advancers outnumbered decliners 894 to 693.
"It will be a struggle for the Japanese market for the rest of the week as the United States stays quiet before labour statistics expected after the weekend," Hamasaki said. Hamasaki said he expects little movement in the market over the next two week as investors wait for most Japanese companies to start reporting earnings results later this month.
In the meantime, investors found little in the tankan survey to inspire broad buying of stocks. The headline diffusion index for big manufacturers' sentiment was plus 23, matching the consensus and unchanged from March. But stocks of Japanese trading houses rallied after oil prices rose above $71 a barrel last week.
Mitsui was one of the biggest gainers on the benchmark, adding 3 percent after Mitsubishi UFJ launched coverage of the stock with a "1" rating. Mitsubishi Corp, an active investor in energy projects, also rose 1.9 percent. Metal-related stocks made strong gains with Sumitomo Metal climbing 2.6 percent to 2,745 yen and Sumitomo Metal Industries also up 2.6 percent at 745 yen. Nippon Light Metal Co Ltd was up 3.4 percent.
Nippon Sheet Glass Co climbed 4.4 percent after it said it would sell Pilkington Australasia for A$690 million to Australia's CSR Ltd, while Chugai Pharmaceutical Co slid 2.7 percent to 2,155 yen after UBS Securities cut its rating on the stock to "reduce 2" from "neutral 2". Investors sold retail stocks after sluggish demand for clothes and other fashion items hurt recent earnings.
Takashimaya slid 1.6 percent to 1,531 yen after Japan's biggest department store chain posted a 12 percent drop in quarterly operating income on Friday. Smaller rival Mitsukoshi also trimmed 1 percent.
Sapporo Holdings was the third worst performer on the main board, losing 5.9 percent to 737 yen after Lehman Brothers launched coverage with an "underweight" rating on Japan's third-biggest beer maker as it may struggle to catch up with its two bigger rivals Asahi Breweries and Kirin Holdings.
Although tankan data had little impact on the overall market, real estate firms Mitsubishi Estate and Mitsui Fudosan Co fell 1.2 percent as the sector's September outlook in the survey was seen falling to 44 from June's reading of 53.
"The tankan numbers show that the sector may be peaking out," said Credit Suisse analyst Yoji Otani. "The momentum on the stocks has come to a halt, and the market is adjusting some of the overvalued ones." The Nikkei is up about 5 percent since the start of 2007, compared with an 8 percent rise in both the US Nasdaq and FTSE Eurofirst 300.