Japanese stocks edged up in a choppy session on Tuesday, with the eighth day of gains underpinned by optimism about the economy's recovery. The Nikkei 225 ended 0.1 percent higher at 20,437.48 after flitting between positive and negative territory during the session. Although the subdued activity raised the risk of profit-taking, the Nikkei's eight-day gains marked its longest winning streak since last August.
The broader Topix was flat at 1,659.57, with only 1.914 billion shares changing hands, the lowest level in a month. "If the stock market is rising with high volume, it's a sign that the market will likely rise further, but when the market is marginally higher on low volume, there is a risk behind the rise," said Norihiro Fujito, a senior investment strategist at Mitsubishi UFJ Morgan Stanley Securities.
"Whether it's a political risk in the euro zone, volatility in the bond market or the timing of a US rate hike, we can't ignore these risks," he said, adding that there's a possibility that bullish positions would be unwound. The JPX-Nikkei Index 400 was also flat at 15,003.85. The Nikkei has gained 4.3 percent over the past seven days, supported by the brighter outlook of shareholders, strong corporate earnings, optimism for the recovering economy and expectations that the US Federal Reserve will hold off from raising interest rates soon.
But some analysts warned that trading volume has been thin in the past two days, which may have been partly due to fewer market participants over Monday's US holiday but could be a sign for a market correction. Trading volume on the Tokyo Stock Exchange's main board was thin on Monday, with only 2.05 billion shares changing hands, the lowest in a month. Volume stood at 2.075 billion shares on Friday.
"If the stock market is rising with high volume, it's a sign that the market will likely rise further, but when the market is marginally higher with low volume, there is a risk behind the rise," said Norihiro Fujito, a senior investment strategist at Mitsubishi UFJ Morgan Stanley Securities, citing a possibility of unwinding bullish positions. "Whether it's a political risk in the euro zone, volatility in the bond market or the timing of a US rate hike, we can't ignore these risks," he said. Exporters lost ground, with Toyota Motor Corp falling 0.4 percent, Honda Motor Co dropping 0.3 percent and Sony Corp shedding 1.2 percent.
Tomy Co tumbled as much as 5.6 percent after it said buyout firm Marunouchi Capital sold its entire stake in the Japanese toymaker to SMBC Nikko Securities. Outperforming the market was Kyushu Electric Power, which rose as much as 4.5 percent after it said it hoped to restart the 890-megawatt No 1 reactor at the Sendai nuclear plant in south-western Japan in late July.