Nikkei trims losses, helped by halt in yen rise

TOKYO, May 18 (Reuters) The Nikkei trimmed some morning falls and was losing 1.3 percent on Thursday after returning above 16,000 as some investors bought undervalued exporters, such as Canon Inc., helped by a halt in the yen's rise.

A sharp sell-off in U.S. stocks due to renewed concerns about inflation and higher rates in one of Japan's biggest export markets had taken the Tokyo market off guard, sending the Nikkei down more than 2.4 percent at one point near midday.

''Panic selling took a toll at the opening. But fund managers with mid- to long-term investment targets are returning to the market,'' said Norihiro Fujito, general manager at Mitsubishi UFJ Securities.

The Nikkei was losing 205.05 points at 16,102.62 as of 0500 GMT after recovering from a morning low of 15,914.39, its lowest intraday since March 9.

The TOPIX index fell 1.62 percent to 1,630.18.

The yen was at around 110.62 to the dollar, off an eight-month high of 108.96 hit on Wednesday. A weaker yen helps Japan's exporters as it increases profits when revenues from abroad are brought home.

''The dollar may have hit a floor and be on the rise, albeit gradually, as the market is listening to strong comments by European officials aiming to deter the dollar's excess fall against the euro,'' Fujito said.

Investors are favouring shares of exporters in particular with their earnings outlooks beating the market consensus, such as Canon, he said.

Canon, Japan's biggest electronics machinery maker by market value, was down 1 percent at 8,180 yen, off a morning low of 8,100 yen.

Shares of brokerages were sold as investors worried that the stock market's slide would hurt appetite of customers and undermine the sector's earnings, but trimmed early losses.

Japan's No.2 brokerage Daiwa Securities Group Inc. was down 5.4 percent at 1,385 yen, off a low of 1,359 yen.

Rival Nomura Holdings Inc. fell 2.3 percent to 2,315 yen. The company said it plans to pay investors a dividend of 32 yen per share in the financial year to March 2007, compared with 48 yen per share a year ago when it posted a record profit.

But Daikin Industries Ltd., Japan's biggest air-conditioner maker, rose 0.8 percent to 3,760 yen.

The company said on Thursday it is discussing buying Malaysian air-conditioner maker OYL Industries Bhd, boosting Daikin's shares by as much as 9 percent.

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