The Nikkei climbed for a fourth straight day on stronger-than-expected US consumer spending data but stopped short of 9,000 with the market wanting more reassurance that the US economy was not slipping back into recession before testing that level. A merger between two big Greek banks also eased some fears about that country's debt woes and lifted some banking shares.
Some market participants said Japanese institutional investors were buying shares of exporters including automakers and consumer electronics companies but that many foreign investors remained on the sidelines. "Japanese institutions are buying but we are still seeing selling by individual investors, particularly those who bought in at recent lows," said Kenichi Hirano, general manager and strategist at Tachibana Securities Co in Tokyo. "In order to break above 9,000 this week, we would need to see signs that recent US gains aren't temporary," he said.
Analysts also said they expect some investor caution to continue as media reports on the current quarter's earnings are likely to emerge in the coming weeks. The benchmark Nikkei finished 1.2 percent higher at 8,953.90 in light trade, after touching an intraday high of 8,992.86. The broader Topix index gained 1.1 percent to 767.30.
US data on Monday showed consumer spending unexpectedly rose 0.8 percent in July, the largest increase in five months, helped by strong demand for motor vehicles. Automakers ended up on Monday but well off their highs in heavy trading. Toyota Motor rose 0.2 percent to 2,721 yen, Honda Motor gained 1.0 percent to 2,438 yen and Nissan Motor added 0.7 percent to 679 yen. Toyota was the most heavily traded share by turnover. "We need to see US economic data for August, to see how the economy is holding up," said Yutaka Miura, senior technical analyst at Mizuho Securities.
Among tech exporters, Sony Corp added 3.5 percent to 1,695 and Toshiba was up 2.1 percent at 339 yen, also getting a lift from media reports that they and Hitachi have agreed to merge their small liquid crystal display making units and that they plan to build a new production base in Japan.
Suppliers of LCD making equipment also gained with Dainippon Screen Manufacturing Co jumping 9.3 percent to 519 yen and Ulvac climbing 5.0 percent to 1,242 yen. Banking shares were also higher following gains in their US and European counterparts after Greek banks Alpha and EFG Eurobank sealed a merger with help from Qatar, shoring up a sector battered by the eurozone's debt crisis.
Mitsubishi UFJ Financial Group gained 1.8 percent to 340 yen and Sumitomo Mitsui Financial Group climbed 2.2 percent to 2,235 yen. JGC Corp gained 3.2 percent to 2,223 yen after the plant engineering firm said on Tuesday it had won a $400 million order to build an oil plant in Algeria.
Its shares have risen more than 20 percent so far this year, outperforming the overall market. Some 1.83 billion shares changed hands on the Tokyo stock exchange's main board, falling short of last week's average of 2.04 billion shares. Advancers far outnumbered decliners, 1,393 issues to 185.