Nikkei down 0.4 pc, exporters hurt by firmer yen

Tokyo, Sept 5: The Nikkei average fell 0.37 percent on Tuesday, retreating from a three-and-a-half month high a day earlier as a stronger yen prompted investors to take profits on exporters such as camera maker Olympus Corp.

Fast Retailing Co. tumbled after it announced it would not make a bid for Hong Kong-listed retailer Giordano International Ltd. while Nippon Oil Corp. slipped on a sharp drop in the price of crude.

But falls were limited due to a solid outlook for corporate profits and the economy, underscored by a government survey on Monday showing that Japanese firms boosted capital spending at the fastest annual pace in nearly five years last quarter.

''The market has had a nice run and some profit-taking set in,'' said Soichiro Monji, chief strategist of equity management at Daiwa SB Investments. ''But sentiment remains strong.'' After drifting in and out of positive territory, the Nikkei ended the morning session 61.17 points lower at 16,296.90 after closing a day earlier at its highest level since May 15. The broader TOPIX index lost 0.29 percent to 1,644.52.

Traders said the market was poised to take a breather from a technical standpoint. The Nikkei's 1.4 percent rally on Monday put its 14-day relative strength index at 71.5, with a reading above 70 usually pointing to limited upside in the near term.

''We were getting a little overheated looking at the technicals.

But European stocks were solid, so there's little downside risk,'' said Ken Masuda, a senior dealer at Shinko Securities, referring to a rise in European shares.

Investors were also a bit wary of buying due to a lack of direction from Wall Street, which was closed on Monday for the Labor Day holiday, Masuda said.

Trade volume edged lower with 801 million shares changing hands, compared with 835 million shares on Monday morning. Decliners slightly outpaced advancers 785 to 742.

EXPORTERS SLIP

Shares of camera and endoscope maker Olympus fell 1.41 percent to 3,490 yen after hitting a 5-month high on Monday while Fuji Photo Film Co. gave up 1.14 percent to 4,330 yen after climbing to its highest in more than 4 years.

Automakers were also hurt by the yen's rise to a two-week high against the dollar at around 115.80 yen Honda Motor Co. gave up 0.75 percent to 3,950 yen and Toyota Motor Corp. lost 0.63 percent to 6,330 yen.

''The currency is not such a worry at these levels but if the yen strengthens to 114 or 113 yen that could put a weight on the market,'' Daiwa SB Investments' Monji said.

Fast Retailing, which had gained some 16 percent since news broke that it was eyeing Giordano, fell 1.6 percent to 10,940 yen. Shares in the operator of the Uniqlo casual-wear chain were the biggest contributor to the Nikkei's fall.

Despite the share drop, Nomura Securities analyst Masafumi Shoda said the failed marriage was not all bad for Fast Retailing, which made the seemingly unwelcome advances toward Giordano to help in its quest to expand abroad.

''A hostile takeover is hard. We see it positively that Fast Retailing did not make an easy investment decision,'' he said.

Among gainers, Nippon Steel Corp. rose 0.6 percent to 502 yen after business daily Nihon Keizai reported that Japan's biggest steel maker and South Korea's POSCO are in talks to jointly develop mines, supply each other with semi-finished products and lift their Cross-shareholdings.

Telecoms and Internet firm Softbank Corp. put on 3.2 percent to 2,255 yen, having now gained about 13 percent since marking a one-month intraday low of 1,995 yen on Aug. 28, hit by a bearish report by Lehman Brothers.

Elsewhere, Nippon Oil fell 2.35 percent to 872 yen due to a drop in oil prices. INPEX Holdings Inc., Japan's biggest oil and gas exploration firm, fell 1 percent to 1.03 million yen.

REUTERS