Nikkei edges up; NTT drops but Toyota Q1 solid

TOKYO, Aug 4 (Reuters) The Nikkei share average inched up 0.19 percent on Friday as investors bought Nitto Boseki Co. Ltd.

and other firms seen as solid earners, but losses in Nippon Telegraph and Telephone Corp. curbed gains.

Toyota Motor Corp ended down 0.5 percent at 6,080 yen, but after the market closed it announced better-than-expected quarterly operating profit and stuck with its forecast for another year of record earnings.

In the paper sector, where a takeover battle is heating up, Mitsubishi Paper Mills Ltd. soared on speculation about further consolidation, while Nippon Paper Group Inc. dropped after it said it had bought a stake in a smaller rival to block a hostile bid by industry leader Oji Paper Co.

Ahead of the U.S. non-farm payrolls data for July later today, investors held back and trade activity hit a three-month low with just 1.35 billion shares changing hands on the Tokyo exchange's first section. This compared to 90-day moving average of 1.75 billion shares per day.

Investors may remain sidelined until the U.S. Federal Reserve meeting next week, but once the event is over the market may be ready to head north, said Shuichi Hida, portfolio manager at Plaza Asset Management. US ''Corporate earnings have been strong and valuations are attractive. We just need sentiment to improve and trade volume to recover,'' he said.

Tsuyoshi Segawa, equity strategist at Shinko Securities, agreed. ''With solid earnings results and the Fed likely to indicate an end to its credit tightening, the Japanese market may see a summer rally,'' he said.

The Nikkei added 28.81 points to 15,499.18 and booked its second straight weekly gain, rising 1.02 percent while the broader TOPIX index was up 0.14 percent at 1,571.70.

But there were sceptics such as Hiroyuki Fukunaga, chief strategist at the research division of Rakuten Securities, who questioned about the summer rally.

He said retail investors were usually active in August, trading from home during the summer holidays, but after a poor performance in the stock market since April they may remain subdued this year.

''The market may see a summer slumber,'' Fukunaga added.

NTT RANG UP LOSSES Nippon Telegraph and Telephone dropped 2.4 percent to 569,000 yen after Japan's largest telecoms carrier said operating profit fell in the first quarter. Its affiliate and system integrator NTT Data Corp. lost 0.8 percent to 526,000 yen.

But Nitto Boseki, a textile spinning company, surged 25 percent to 380 yen on solid quarterly earnings and upgrades of its forecast for the six months to September thanks to strong sales of glass fibre and building materials.

Takeda Pharmaceutical Co. Ltd. rose 1.7 percent to 7,630 yen to lead the Nikkei's gains as investors cheered the news that Japan's biggest drug maker got the green light from European regulators to sell its diabetes drug.

In the paper sector, Mitsubishi Paper jumped 8.3 percent to 249 yen while Nippon Paper shed 2.2 percent to 446,000 yen.

Oji Paper, which launched a tender offer on Wednesday for sixth-ranked Hokuetsu Paper Mills Ltd., inched up 0.3 percent at 682 yen. Hokuetsu added 1.9 percent to 846 yen.

After the market closed on Friday, Asahi Breweries Ltd.

posted a 7.1 percent fall in half-year operating profit due to sluggish sales, and slashed its full-year forecast to roughly meet market expectations.

Prior to the announcement, the stock ended up 0.2 percent at 1,698 yen.

Advancers slightly outnumbered decliners 786 to 745.

REUTERS PKS HS1728