Nikkei inches lower as Softbank falls

TOKYO, Sep 6 (Reuters) The Nikkei average edged down 0.13 percent on Wednesday as Softbank Corp. fell after a brokerage downgrade, but Mitsubishi Heavy Industries Ltd. rose on a newspaper report about a project led by the company to build Japan's first passenger jet.

Shares in Nippon Flour Mills Co. Ltd. and movie producer Toei Co.

Ltd. lost more than 2 percent after news they will be removed from the benchmark Nikkei next month.

Its compiler, Nihon Keizai Shimbun Inc., plans to replace the two stocks with real estate firm Tokyu Land Corp. and another movie producer, Toho Co. Ltd., in an annual rejig on Oct. 2.

Investors appeared split over the outlook for the Japanese economy, keeping the market in check.

A series of weak economic data, including consumer prices, had fuelled views that the outlook is not bright enough for the Bank of Japan to raise interest rates any time soon.

The central bank's board meets on Thursday and Friday, but the market expects no change in policy.

Akio Yoshino, general manager at Societe Generale Asset Management, said the stock market still has room to rise in the coming weeks, a view shared by other analysts.

Yoshino said upcoming events in Japan, including the government's monthly economic report and land price data, are expected to support the market's momentum, initially spurred on Monday by surprisingly strong capital spending data.

''It's too early to say that the market has stalled. I think it certainly has room to rise,'' he said.

The Nikkei finished the morning session down 22.10 points at 16,363.86. It hit a three-month closing high for the second straight session on Tuesday.

The broader TOPIX index was down 0.04 percent at 1,650.61.

SOFTBANK FALLS Internet and communications conglomerate Softbank lost 2.8 percent to 2,245 yen after Credit Suisse lowered its rating on the stock to ''underperform'' from ''neutral'' and slashed its targe price to 1,340 yen from 2,620 yen.

Credit Suisse said the move reflects falls in the market value of the stocks in which Softbank has invested and lower valuations of Softbank's mobile communications business.

Shares of baby goods makers, such as baby stroller maker Combi Corp., faced a flurry of sales as investors grabbed profits in the stocks after Japan's Princess Kiko gave birth to a baby boy early on Wednesday.

Having risen in the leadup to the birth, which was seen as possibly encouraging other couples to have children, Combi sank 10.1 percent to 885 yen.

In contrast, shares in Mitsubishi Heavy gained 1.4 percent to 525 yen after business daily Nihon Keizai reported on Wednesday the Japanese government will pick up the tab for 30 percent of the costs of the jet-manufacturing project.

Sumitomo Titanium Corp., which makes titanium products used in aerospace, rose 4.7 percent to 27,280 yen after earlier hitting its all-time high of 27,400 yen.

NIKKEI REJIG The Nikkei's rejig affected stocks beyond those that are being added or removed as betting on it has become a popular sport for speculative investors such as day traders, who stand to gain if they pick the correct stocks before index-tracking funds follow the actual changes.

''The rejig triggered ups and downs of several individual stocks.

Disappointing selling hit, for example, Yamada Denki,'' said Susumu Abe, manager at Mito Securities' information and investment department.

Among shares which had been seen as candidates to join, retailer Yamada Denki Co. Ltd. slumped 4.1 percent to 12,390 yen and financial services firm SBI Holdings Inc. dropped 3 percent to 45,600 yen.

General contractor Kumagai Gumi Co. Ltd. surged 13.9 percent to 303 yen as the stock keeps its place in the Nikkei despite earlier expectations that it would be deleted due to a lack of liquidity.

Shares of Nippon Flour Mills fell 3.1 percent to 533 yen and movie producer Toei lost 2.5 percent to 890 yen. Tokyu was down 0.8 percent at 1,083 yen and Toho was up 0.8 percent at 2,515 yen.

The rejig helped trading volume to swell, with 931 million shares changing hands on the first section, the highest morning trade volume since Aug. 18. Decliners slightly outnumbered advancers 801 to 729.

Reuters KR DB1001