Japan stocks slip on demand concern

Tokyo, Sept 4: Japanese stocks slipped on Tuesday as concerns about domestic demand in the wake of an unexpected drop in capital spending weighed on the market in thin trade and a wait-and-see mood spread ahead of U.S. indicators due out later this week.

Shares of Nippon Steel Corp and Mitsubishi Heavy Industries Ltd rose after the Nikkei business daily reported the two had agreed to merge their bridge construction businesses to better compete in a shrinking market.

But trade was lacklustre following the U.S. Labor Day holiday on Monday, with investors looking to U.S. markets for cues amid lingering credit concerns.

Markets were disappointed by Japanese government data on Monday showing Japanese firms cut capital spending by 4.9 per cent in April-June from a year earlier, against a median forecast by economists for an 11.5 per cent rise.

''There's no doubt that these figures raised doubts about Japanese domestic consumption, and this has led to some selling of related shares. There really is no big reason to buy,'' said Tsuyoshi Nomaguchi, a strategist at Daiwa Securities.

''But trade in Tokyo is going to be pretty light, with a lot of indicators due out in the U.S. this week, and investors are waiting to see.'' He said a slight strengthening of the yen could be contributing to sales but the market lacked strong trading factors overall.

The dollar was around 115.80 yen compared with 115.97 in London trade on Monday.

The benchmark Nikkei average was down 0.33 per cent or 54.97 points at 16,469.96 as of 0106 GMT. The broader TOPIX index lost 0.06 per cent or 0.99 point to 1,604.92.

Shares in bridge makers also rose after the report of the agreement between Nippon Steel and Mitsubishi Heavy sparked hopes for further consolidation in the sector.

The new company will have annual revenue of more than 40 billion yen ($345 million) and control more than 10 per cent of the domestic market, surpassing industry leader Yokogawa Bridge Holdings, the Nikkei said.

Nippon Steel was up 0.6 per cent at 828 yen and Mitsubishi Heavy at 1 per cent at 716 yen, while Japan Bridge Corp, a maker of steel structures including bridges, surged 11.11 pe rcent to 320 yen.

Matsuo Bridge jumped 9.9 per cent to 144 yen.

REUTERS>