Nikkei inches down, Alps Electric, Toyota fall

Tokyo, May 11: The Nikkei average fell 0.09 percent on Thursday as Alps Electric Co. Ltd. sank on a disappointing outlook and Toyota Motor Corp. fell 2 percent, extending losses into a third session.

The overall market was being overshadowed by lingering concerns that a strong yen would negatively affect earnings at Japanese exporters, analysts said.

Although the dollar recovered some ground versus the yen after the U.S. Federal Reserve on Wednesday left the door open to further interest rate rises, the current level of around 111 yen is critical for many Japanese exporters.

''The dollar is hovering not far from the 110 yen region. That's now providing the biggest headache to the market,'' said Yusuke Sakai, manager of equities trading at Mizuho Securities.

The Nikkei average ended the morning down 14.50 points at 16,937.43 after falling 238.98 points on Wednesday. The TOPIX index was down 0.46 percent at 1,717.18.

Companies to announce earnings later in the day include NEC Corp., Konica Minolta Holdings Inc., Mitsubishi Estate Co. Ltd.

and Takeda Pharmaceutical Co. Ltd.

The yen was trading at around 111.15 to the dollar. On Wednesday it hit an eight-month high of 110.11.

A strong yen is a minus for Japan's exporters as it eats into profits when revenues from abroad are brought home.

Toyota, the world's second-biggest auto maker, fell 2 percent to 6,550 yen.

Toyota on Wednesday projected a modest 1.2 percent rise in operating profit, based on an assumed dollar/yen rate of 110, the guidance falling short of the market consensus.

Rivals also lost ground. Nissan Motor Co. Ltd. was down 2.1 percent at 1,481 yen. Honda Motor Co. Ltd. declined 0.8 percent to 7,990 yen.

Electronics parts maker Alps Electric plunged by its daily 300 yen limit, or 15.3 percent, to 1,659 yen.

It forecast a decline of nearly 29 percent in operating profit in the year to March 2007 due to sliding sales of magnetic heads for hard disk drives and other components.

Matsushita Electric Industrial Co. Ltd., the maker of Panasonic products, lost 0.7 percent to 2,720 yen, extending losses into the fourth session.

In contrast, electronics parts maker Ibiden Co. Ltd. rose 8.5 percent to 5,720 yen due to hopes for strong earnings prospects this business year.

Goldman Sachs noted in a report on Thursday room for further outperformance in Ibiden's bullish earnings guidance.

Olympus Corp., the world's top maker of endoscopes, gained 4.4 percent to 3,330 yen.

The company said on Wednesday that its annual profit more than doubled on cost cuts in its digital camera division and strong endoscope sales, and it forecast a higher-than-expected gain this year to a record level.

Elsewhere, condominium builder Haseko Corp. rose 0.7 percent to 450 yen and sporting goods manufacturer Asics Corp. was up 2.8 percent at 1,415 yen. They are among 21 stocks which MSCI Barra said late on Wednesday would be added to the MSCI Japan Index as of May 31, when an annual review of the index's constituents becomes effective.

Buying was inspired by expectations that index-tracking funds as well as active funds using MSCI indices as a gauge for their portfolio performance would follow the changes.

Eiji Kinouchi, chief technical analyst at Daiwa Institute of Research, said the changes in the Japan index would help global investors, including U.S. mutual funds, look into medium- to small-cap Japanese stocks.

''It's a minor change in terms of the number of the ins and outs as more than 30 stocks were affected last year and the year before. But a good thing this time is that the changes are focused on frontier companies,'' he said.

REUTERS