Nikkei edges up on KDDI, Nikon; but banks fall

TOKYO, Apr 26 (Reuters) The Nikkei average rose 0.09 percent on Wednesday as KDDI Corp. climbed after its earnings forecasts helped prompt brokerage upgrades, while Nikon Corp. gained after it said it would beat its full-year profit estimate by 25 percent.

But Sumitomo Mitsui Financial Group Inc. led banking stocks lower after a newspaper said Japan's financial regulator would penalise the lender as early as this week for unfair marketing of financial products.

Companies scheduled to report full-year earnings on Wednesday included Sharp Corp., Honda Motor Co., chip-equipment maker Advantest Corp. and brokerage Daiwa Securities Group Inc.

''Right now the market is showing a positive reaction to yesterday's earnings results,'' said Takashi Ushio, head of the investment strategy division at Marusan Securities.

''But investors are also in something of a wait-and-see mood, as we have earnings from industrial electronics firms tomorrow,'' he added.

The Nikkei was up 15.32 points at 16,985.61. The TOPIX index was down 0.20 percent at 1,716.36.

KDDI Corp. rose 5.2 percent to 690,000 yen after Japan's No.2 telecoms company forecast a 7 percent rise in overall operating profit in the current year.

KDDI's better-than-expected forecast prompted brokerage JP Morgan to raise its rating on the stock to ''neutral'' from ''underweight''. Credit Suisse and Nomura Securities also lifted their ratings on the firm.

Camera and chip-equipment maker Nikon climbed 7.3 percent to 2,220 yen after it said it would beat its own 2005/06 operating profit estimate by 25 percent and would boost its dividend.

Sumitomo Mitsui fell 1.6 percent to 1.25 million yen after the Sankei newspaper reported that Japan's Financial Services Agency will penalise the company's core banking unit for coercing borrowers into accepting higher interest rates on loans.

''At this point no one knows what is going to happen with Sumitomo Mitsui,'' said Ken Masuda, senior dealer in equities at Shinko Securities.

''They could be ordered to halt business for a day or two ... we don't know.'' REUTERS CS KN1104