Nikkei falls on exporters, utilities bolster TOPIX

TOKYO, May 9: The Nikkei share average fell 0.25 percent on Tuesday as shares of Advantest Corp. and Canon Inc. declined due to investor concern about the impact of a stronger yen on exporters' earnings.

But shares of utilities, steel firms and other companies that are less exposed to currency risks advanced, helping to nudge the broader TOPIX index into positive territory.

''While I had expected the yen to rise further than it did yesterday, without a doubt the direction is that of a strong yen,'' said Ken Masuda, senior dealer in equities at Shinko Securities.

''Investors are now buying stocks that aren't really influenced by the currency.'' The Nikkei finished the morning down 43.11 points at 17,248.56.

The TOPIX ended up 0.02 percent at 1,755.46.

The yen was at 111.61 to the dollar, after hitting an eight-month high of 110.97 on Monday.

A strong yen is a minus for companies that make the bulk of their sales outside of Japan, as it eats into profits when earnings from abroad are brought home.

Chip-equipment maker Advantest, which makes about 75 percent of its sales outside of Japan, slid 2 percent to 12,970 yen.

Office-equipment manufacturer Canon fell 1.3 percent to 8,630 yen. Kyocera Corp., a maker of electronics components, declined 2.5 percent to 10,360 yen.

But Tokyo Electric Power Co. Inc., Asia's largest utility, rose 2 percent to 3,140 yen.

Steel maker Nippon Steel Corp. rose 1.6 percent to 439 yen. The company makes less than a quarter of its sales abroad.

Investors also remained cautious before Wednesday's interest rate policy meeting of the U.S. Federal Reserve.

''Today is a day when it is better to take a wait-and-see stance ... we have no idea what (Fed Chairman Ben) Bernanke is going to say this time,'' Shinko's Masuda said.

While the central bank is widely expected to raise short-term rates by a quarter percentage point, investors will focus on the Fed's accompanying statement for clues about a possible pause in rate increases in the world's largest economy.

BAD FOR THE YEN? Growing speculation that the Fed has nearly ended its two-year tightening campaign has weighed on the dollar in recent sessions.

While an end to the current cycle of rate increases would be a plus for equity markets, it would also raise concerns that the yen could advance further, said Tatsuyuki Kawasaki, director of equities trading division at Kaneyama Securities.

''From a macroeconomic standpoint, an end to rate increases is a positive for stocks, but we have to wonder how the currency will respond,'' Kawasaki said.

''We could possibly see some changes in (investors') asset allocation, which may very well lead to selling of the dollar, and therefore a stronger yen.'' Elsewhere, shares of AOC Holdings Inc. dropped 5.1 percent to 2,350 yen. The company on Monday forecast an operating profit for the current year that was below analysts' estimates.

Trade was active with 951 million shares changing hands on the Tokyo exchange's first section. Decliners beat advancers, 908 to 622.

REUTERS