Nikkei turns down as exporters, realtors hit

Tokyo, June 21: The Nikkei average gave up early gains and fell 0.35 percent on Wednesday as shares of exporters such as Sony Corp. resumed their slide on concern higher U.S. interest rates would hurt demand in a key market for Japanese products.

Real estate stocks, including Mitsubishi Estate Co. Ltd., fell on rate concerns at home as comments by Bank of Japan Governor Toshihiko Fukui late on Tuesday stirred speculation that the central bank may end its zero rate policy as early as next month.

The Nikkei was 51.26 points lower at 14,597.15 by the midday break, extending its falls into a third session. It earlier rose as high as 14,713.43.

The TOPIX index was down 0.62 percent at 1,501.03.

While stronger-than-expected U.S. housing data eased concern about a slowdown in a key export market, many still fear that the U.S. Federal Reserve will keep raising interest rates even after an expected rate hike next week.

Recent comments from Fed Chairman Ben Bernanke and other Fed officials suggest the U.S. central bank is deeply concerned about inflation, said Norihiro Fujito, general manager at Mitsubishi UFJ Securities' investment research and information division.

''If the Fed raises interest rates despite signs of a slowdown in private spending in the U.S., that would the worst scenario we're afraid of,'' Fujito said.

''We cannot ignore the possibility a wave of selling hits the markets around the globe again. The first one was in May and the second one earlier this month,'' he added.

Consumer electronics maker Sony, the bulk of whose sales are made in the U.S. market, fell 1.9 percent to 4,750 yen, extending its losses into a third session.

Electronics components maker TDK Corp. was down 1.2 percent at 8,330 yen.

Toyota Motor Corp., the world's second-biggest auto maker, was down 0.9 percent at 5,730 yen.

REALTORS HIT The real estate sector subindex IRLTY.fell 2.45 percent by midday, the worst performing sector among the 33 industries on the Tokyo exchange's first section.

While the BOJ's first rate increase in six years would be a way to normalise its monetary policy, higher interest rates often result in lower housing demand and capital spending.

Major real estate developer Mitsubishi Estate lost 3.4 percent to 2,140 yen. Rival Mitsui Fudosan Co. Ltd. was down 2 percent at 2,215 yen.

But real estate investment trusts (REITs) gained ground after falling sharply in the previous two sessions following the Japanese financial watchdog's call for disciplinary action late last week against Orix Corp.'s asset management firm and its REIT, Orix JREIT Inc.

Orix JREIT climbed 6.1 percent after falling a total 16 percent in the previous two sessions. But Orix extended falls into a third session and lost 2.7 percent.

Media reports said Orix, Japan's biggest leasing firm, invested some 20 billion yen in a fund set up by former fund manager Yoshiaki Murakami, who has been arrested on suspicion of insider trading.

Although it has severed the investment, concerns remained about an ethical issue over the company's management.

NEC Corp. rose 1 percent to 587 yen following a newspaper report that the company is likely to sell the majority of its holding in its wholly-owned unit Packard Bell BV, effectively pulling out of the personal computer market in Europe.

Shares in Nippon Mining Holdings Inc. climbed 3.4 percent to 953 yen after its unit Japan Energy and Nippon Oil Corp. announced a 10 year alliance in oil development, refining, logistics and fuel cells.

Reuters