Nikkei choppy as tankan disappoints, utility shares drop

Mon Mar 31, 2014 10:11pm EDT

* Nikkei choppy as risk appetite is capped by BOJ tankan's
weak outlook
    * Utility stocks drop on Hokkaido Electric's capital
injection report
    * Banks higher on higher profit expectation

    By Ayai Tomisawa
    TOKYO, April 1 (Reuters) - Japan's Nikkei share average was
choppy on Tuesday morning,  with buying crimped by a sombre
business confidence survey and losses in utilities on a report
that Hokkaido Electric Power Co will get a capital
infusion from a state-owned lender.
    The benchmark Nikkei added 0.2 percent to 14,850.01
in mid-morning trade after moving in and out of the red during
the session. The index rose 0.9 percent to a three-week high on
the previous day.
    The morning session provided investors with some sobering
news on business sentiment. 
    Japanese business sentiment barely improved in the three
months to March and is set to sour in the following quarter, the
Bank Of Japan's tankan quarterly survey showed, reflecting
uncertainty over how much a sales tax hike that kicked off on
Tuesday could hurt a fragile economic recovery. 
    "Most companies are prepared to see weaker profits in the
first quarter compared to the last quarter so this is not a
surprise. That said, since the market saw a fiscal-year-end
rally, investors are using the tankan result as an excuse to
take profits," said Takatoshi Itoshima, chief portfolio manager
at Commons Asset Management.
    On Tuesday, Japan's sales tax rose to 8 percent from 5
percent.
    Worries that the tax hike may make a bigger-than-expected
dent in the economy has stoked speculation the BOJ will move
soon to offer fresh stimulus.
     A spurt in spending by consumers in March seeking to beat
the tax hike "is expected to cover any potential losses by
retailers over the next few months," said Mariko Takemura,
senior research analyst at Euromonitor. "But it remains to be
seen how the tax will impact Japan's economy in the long-term." 
    Banks were higher after the Nikkei daily reported that the
stock market rally and improving corporate earnings likely
pushed up total fiscal 2013 net profits at the three Japanese
megabanks by 10 percent. Sumitomo Mitsui Financial Group
 gained 0.7 percent and was the fourth most traded stock
by turnover, while Mitsubishi UFJ Financial Group added
0.4 percent and was the fifth most traded stock.
    The utility subsector was the biggest sectoral
loser, falling 2.0 percent after the Nikkei said that Hokkaido
Electric is facing a third year of financial losses and will get
a capital infusion from the government-owned Development Bank of
Japan. 
    The report hurt sentiment across the utilities sector,
dragging down Kansai Electric Power Co and Chugoku
Electric Power Co by 3.1 percent and 2.6 percent,
respectively.
    The broader Topix was flat at 1,202.69, and the
JPX-Nikkei Index 400, a recently introduced gauge
comprised of companies with a high return on equity and robust
corporate governance, shed 0.1 percent to 10,887.51.