Nikkei retreats, Honda, auto stocks down

Tokyo, July 10: Japan's Nikkei average retreated from a seven-year closing high hit the previous session on Tuesday, with investors taking profits in Honda Motor Co. Ltd.

and other auto shares on a slightly stronger yen.

But the market received support from Mitsui&Co. Ltd. Mitsui climbed nearly 3 per cent after Goldman Sachs raised its target price on the trading house to 3,100 yen from 2,170 yen.

Investors were also waiting for the closely watched settlement price, known in Japan as the special quotation or ''SQ'', which is calculated from the opening prices of the 225 shares on the Nikkei average on the second Friday of the month.

''In addition to yesterday's rally, investors are turning cautious before the central bank's policy meeting and the SQ and because of the slightly stronger yen,'' said Katsuhiko Kodama, senior strategist at Toyo Securities.

Bank of Japan Governor Toshihiko Fukui is scheduled to speak at a news conference on Thursday after a two-day meeting of the central bank's policy board.

''But the market is likely to move in a very narrow range as investors are also buying on dips following a net buy by foreigners,'' Kodama added.

The benchmark Nikkei was down 0.25 per cent, or 45.62 points, at 18,216.36 as of 0049 GMT. It ended the previous session up 0.67 per cent at 18,261.98, the highest close since May 2000.

The broader TOPIX index shed 0.34 per cent to 1,786.10.

The dollar stood at 123.30 yen after the U.S. currency rose as high as 124.14 yen last month, the highest since December 2002.

Auto stocks fell with Honda down 1.1 per cent at 4,510 yen, while Toyota Motor Corp. lost 0.5 per cent to 7,790 yen. Other exporters also declined with Canon Inc. falling 1.3 per cent to 7,100 yen.

A stronger yen weighs on exporters as it cuts the value of their overseas sales when translated back into the Japanese currency.

Meanwhile, shares of Mitsui rose 2.7 per cent to 2,675 yen.

Analyst Yukihiro Iwasaki said in July 9 report he was reiterating his buy ratings for Mitsui and rival Mitsubishi Corp.

and keeping Mitsui on the brokerage's conviction buy list.

Mitsubishi's target price was raised to 3,750 yen from 3,450.

Mitsubishi's shares added 0.6 per cent to 3,390 yen.

Elsewhere, Seiko Epson Corp. was down 2.7 per cent at 3,990 yen after Lexmark International Inc., its rival in the printer market, slashed its second-quarter earnings outlook on Monday, citing disappointing revenue from inkjet printers and cartridges, and its shares fell as much as 12 per cent.

Reuters>