Nikkei falters as Softbank declines; Suzuki gains

TOKYO, Mar 7 (Reuters) The Nikkei average fell for the fourth time in five sessions on Tuesday, dropping 1.1 percent as investors sold Softbank Corp. on concerns the Internet firm's finances may be shaken by its possible takeover of a mobile phone operator.

But Suzuki Motor Corp. gained after the maker of compact cars said it would keep its operational alliance with General Motors Corp. even though the U.S. firm has sold most of its stake in Suzuki.

The market was also capped amid widespread caution ahead of a possibly pivotal meeting of the Bank of Japan's policy board.

The Nikkei finished down 175.14 points at 15,726.02, wiping out most of its gains from the previous session.

The broader TOPIX index ended down 0.53 percent at 1,617.87.

Softbank was the biggest drag on the Nikkei, falling 8.5 percent to 3,140 yen as investors focused on the financial burden if Softbank were to buy the Japanese unit of Britain's Vodafone Group Plc News of the deal, which could cost up to 2 trillion yen (.01 billion), had sent Softbank's shares up nearly 4 percent in the previous session.

''Yesterday I think Softbank gained as investors saw this as part of its new growth strategy. But I think the price of the purchase is very much at a premium,'' said Masaki Iso, chief investment officer at Yasuda Asset Management.

''Yesterday's gains were based on sentiment. If you think about this calmly, it looks expensive,'' he said.

Trade volume rose slightly from the previous session, when it its lowest level in seven months, with 1.64 billion shares changing hands on the Tokyo exchange's first section.

Decliners beat out advancers 1,064 to 536.

BOJ CONTINUES TO WEIGH Concerns ahead of the Bank of Japan's policy meeting that starts on Wednesday continued to weigh on the Nikkei. The meeting could result in the central bank ending its five-year-old policy of flooding financial markets with excess liquidity.

But recent losses prove the market has already factored in that the BOJ will scrap its policy this week, said Kirby Daley, a strategist at Fimat.

''I believe they will move this week, and I believe they should move this week,'' he said.

''If they don't move, it has the potential to surprise the markets even more ... There's no upside to waiting.'' Suzuki rose 3 percent to 2,565 after earlier hitting a life high of 2,680 yen.

The auto maker said on Tuesday it bought most of its shares previously held by GM in the open market for 227 billion yen.

Concern Suzuki would completely sever its alliance with GM had hurt the Japanese firm's stock on Monday.

Elsewhere, Ibiden Co. Ltd. gained 3.1 percent to 5,030 yen after Deutsche Securities on Tuesday raised its rating on the maker of printed circuit boards to ''buy'' from ''hold'', citing recent declines in its share price.

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