Nikkei nearly flat on profit-taking but banks gain

TOKYO, May 8 (Reuters) The Nikkei share average was nearly flat on Tuesday as investors took profits in recent gainers such as Canon Inc. after the benchmark closed at its highest in more than three weeks the previous session.

But bank shares advanced, largely helped by an upgrade of Japanese banks by ratings agency Moody's, said Katsuhiko Kodama, senior strategist at Toyo Securities.

Moody's said on Friday it upgraded ratings of Mitsubishi UFJ Financial Group Inc., Mizuho Financial Group Inc.

and Sumitomo Mitsui Financial Group Inc. to Aa2 from A1, mainly reflecting those banks' improvements in financial fundamentals.

''The Nikkei lacks news to trade on to go further up after yesterday's unexpectedly large gain,'' he said.

''The market wants to correct itself on gradually improving earnings outlooks, but it's not enough.'' Kodama said the U.S. market is likely to be cautious overnight before the Federal Reserve's rate decision on Wednesday.

The Nikkei inched up 0.11 percent or 18.7 points to 17,688.54 as of 0050 GMT. The broad TOPIX index added 0.35 percent to 1,739.03.

Bank shares rose, with Mitsubishi UFJ Financial Group up 3.1 percent at 1.33 million yen, Mizuho Financial Group rising 2.9 percent to 772,000 yen and Sumitomo Mitsui Financial Group climbing 1.9 percent to 1.08 million yen.

Shares of Mitsubishi Heavy Industries Ltd. were up 3.4 percent at 760 yen after the Nikkei business daily said the company would start shipping samples of OEL (organic electroluminescent) lighting panels this year and aims to begin mass production in 2009.

Daido Steel Co. Ltd. jumped 5 percent to 760 yen after the Asahi newspaper reported on Tuesday that the company asked four major Japanese auto makers to buy or raise stakes in it to help fend off any future unsolicited takeover bids.

Canon fell 1.3 percent to 7,000 yen.

Reuters SBA VP0700