Nikkei slips after rally, more resistance seen

TOKYO (Reuters) - Japan's Nikkei average fell 0.8 percent on Tuesday, dented by profit-taking after four days of hefty gains and as the yen's strength shows little sign of abating.

For a second straight day the benchmark managed to hold above its 25-day moving average, which had served as resistance for most of last month, but it struggled to convincingly snap its downward trend, with further resistance lying ahead on technical charts.

Market players were also keen to see how Wall Street reacts after U.S. President Barack Obama proposed to rebuild U.S. infrastructure with an initial $50 billion investment and prepared new business tax cuts. U.S. stock futures were down 0.3 percent after markets were closed on Monday for Labor Day.

"The yen's strength hasn't gone away, and there's really no reason to buy Japanese stocks at this point. The Bank of Japan is out of cards and it's about time the government took charge, but its focus appears to be on (the ruling Democratic Party's) leadership election on September 14," said Kazutaka Oshima, president of Rakuten Investment Management.

"But extreme pessimism about the U.S. economy has receded, and the news about Obama's plan is an additional positive factor that could push up U.S. stocks and yields."

The Nikkei .N225 ended the day down 75.32 points at 9,226.00. Its 25-day moving average, currently around 9,210, is considered a proxy for a one-month moving average and is closely watched in Japan.

The Nikkei has recovered about 5 percent this month following a 7.5 percent slide in August but remains one of the worst-performing major world stock markets this year, hurt by worries about the impact of the yen's strength on corporate earnings and the fragile economic recovery.

The broader Topix .TOPX fell 0.5 percent to 834.92.

The impact was muted from the Bank of Japan's decision to keep monetary policy unchanged. After easing policy just last week, the central bank kept interest rates on hold at 0.1 percent as widely expected.

At a post-meeting news conference, Governor Masaaki Shirakawa said the central bank would carefully watch the yen's impact on Japan's economy, but said it was wrong to judge the success of its policy actions based on short-term market moves alone.

The dollar traded at 83.85 yen, within sight of a 15-year low of 83.58 yen hit on electronic trading platform EBS late last month. <FRX/>

After the 25-day moving average, the Nikkei's next downward target is seen at 9,126, around its five-day moving average, and then at 9,053, its "tenkan sen" on daily Ichimoku charts, an indicator of short-term trends. Ichimoku charts are popular with Japanese traders.

The Nikkei's resistance lies at 9,408, its 13-week moving average, and around 9,460, where the bottom of its Ichimoku cloud lies.

NIKKEI JOINERS JUMP

Shares of Tokyo Tatemono Co Ltd (8804.T) and Nippon Electric Glass Co Ltd (5214.T) climbed after the publisher of the Nikkei 225 said on Monday it would add the two stocks as new components of the index in the coming weeks.

Tokyo Tatemono jumped 3.2 percent to 319 yen and Nippon Electric Glass added 1.4 percent to 1,080 yen. Clarion Co Ltd (6796.T), which will be removed on October 1, lost 9.3 percent to 157 yen.

Shares of exporters lost ground after having led gains the previous day, with Advantest Corp (6857.T) shedding 1.8 percent to 1,655 yen.

Rollingstock manufacturers and transport equipment makers gained following the Obama stimulus proposal involving $50 billion in initial investment, including a plan to lay and maintain 6,400 km (3,980 miles) of railway in the United States.

Shares of Nippon Sharyo (7102.T), a major rollingstock maker, gained 4.1 percent to 407 yen, while peer Kinki Sharyo (7122.T) rose 3.1 percent to 396 yen.

Some 1.59 billion shares changed hands on the Tokyo exchange's first section, the highest volume in about a week.

Declining shares outnumbered advancing ones by more than 2 to 1.

(Editing by Chris Gallagher)