The Nikkei average ended flat on Monday, with investor caution before the Federal Open Market Committee meeting this week offsetting gains in power companies, which rose on a minister's call for the restart of nuclear reactors. Analysts said concerns over the pace of recovery in the US economy with the end of the Federal Reserve's bond-buying programme this month and escalating debt woes in Greece are causing investors to keep to the sidelines.
They said the Nikkei might stay below 9,500 until after the Federal Open Market Committee meeting ending on Wednesday and comments by Fed Chairman Ben Bernanke. "The market may stay sluggish until there are more signs about where the US economy is going after the end of QE2 ... that's what most market participants are worried about now," said Naoki Fujiwara, a fund manager at Shinkin Asset Management.
Power company shares rose in Tokyo after Trade Minister Banri Kaieda said on Saturday that government inspections showed all nuclear power plants in Japan had adequate safety measures against severe accidents and called on local governments to allow the restart of reactors.
Only 19 of Japan's 54 reactors are still functioning, putting strains on power supply, with many that shut for routine checks having failed to obtain local permission to resume due to worries over the radiation crisis at the Fukushima Daiichi plant, triggered by the March 11 earthquake and tsunami. The benchmark Nikkei closed virtually flat at 9,354.32, while the broader Topix gained 0.2 percent to 806.83. Analysts said the Nikkei would likely be supported around 9,200 over the next few weeks, with many investors eager to scoop up shares on dips.
Thomson Reuters StarMine shows Japan trades at the biggest discount among developed markets, with valuations at just 8 times forward earnings, compared with 10.5 times for Asia and as much as 12.7 times for the US market. In reaction to the weekend comments by Kaieda, Chubu Electric hit a 5-week high, gaining 7.9 percent to 1,440 yen, while Kansai Electric jumped 7.7 percent to 1,420 yen.
The electric and gas subindex has tumbled more than 41 percent since the March 11 disaster, underperforming the Nikkei's 9 percent post-quake slide. Mazda Motors rose 2.1 percent to 199 yen after the carmaker forecast an operating profit on Friday of 20 billion yen ($250 million) for the year to next March, above the average 5.66 billion yen projection in a survey of 21 analysts by Thomson Reuters I/B/E/S.