The Nikkei average edged lower on Tuesday, backing away from an eight-month high hit at the end of last week, as worries over the eurozone's debt problems prompted some investors to lock in profits on recent gainers. Japan's announcement that it planned to buy eurozone bonds to support the European financial system boosted the euro against the yen, which briefly lifted shares of exporters but had a limited impact on the overall market.
"There is still uncertainty over the European economy, so investors are cautious especially after the Tokyo market's recent sharp gains," said Yumi Nishimura, senior market analyst at Daiwa Securities Capital Markets. The benchmark Nikkei closed down 0.3 percent or 30.36 points at 10,510.68, after hitting an eight-month closing high on Friday. Tokyo markets were closed on Monday for a public holiday.
Falls were limited as many traders said they were already concentrating on this week's earnings announcements from US companies, looking for further signs that the world's No 1 economy is picking up steam. Morgan Stanley, Intel Corp and Advanced Micro Devices Inc are among companies reporting earnings this week. The broader Topix index was up 0.1 percent at 926.94. Market players played down the impact of the announcement, however, noting that euro zone debt worries, the main reason investors sold stocks on Tuesday, were persistent and likely to keep resurfacing.
The euro-sensitive precision machinery sector lost 0.7 percent and exporters with high exposure to Europe were among the biggest underperformers on the Nikkei, with Canon Inc dropping 1.4 percent to 4,155 yen and Olympus Corp falling 1.1 percent to 2,519 yen. Elpida Memory fell 3.8 percent to 1,001 yen after the Nikkei business daily on Saturday said that sharply declining DRAM chip prices are severely hitting suppliers' earnings, with Elpida likely suffering its first group operating loss in six quarters in the October-December period.
The world's third-biggest DRAM maker appears to have ended the quarter with an operating loss exceeding 20 billion yen, compared with a profit of 30.5 billion yen a year earlier, the daily said. Resona Holdings slipped 7.3 percent to 485 yen after it said on Friday that it would go ahead with a share offering to raise about $8 billion, taking advantage of the recently buoyant stock market to make progress on its repayment of government bailout funds.
Nippon Steel Corp rose 3.8 percent to 303 yen and JFE Holdings Inc added 2.5 percent to 2,907 after Credit Suisse hiked the iron and steel sector to "overweight" from "marketweight", citing recovering demand in China. Aeon Co Ltd, Japan's second-largest retailer, was up 2.9 percent at 1,051 yen after posting a 52 percent surge in quarterly operating profit and keeping its annual outlook unchanged. Volume was steady, with around 2.1 billion shares changing hands on the Tokyo Stock Exchange's first section, slightly above last week's daily average of 2.0 billion. Advancing issues outnumbered decliners by 1,069 to 462.