Nikkei slips on economic concerns, but Canon gains

By Elaine Lies

TOKYO (Reuters) - Japan's Nikkei stock average edged down 0.6 percent on Tuesday, with exporters such as Sony Corp weighed by a strong yen and investors locking in profits in the face of long-term uncertainty about the economy. Bucking the trend, Canon Inc climbed 3 percent after it said on Monday it plans to buy Dutch copier and printer maker Oce for 730 million euros ($1.1 billion), in a challenge to rivals Ricoh and Xerox. U.S. stocks rose to fresh 13-month closing highs after Federal Reserve Chairman Ben Bernanke reinforced expectations that interest rates would stay low to spur growth.

But Tokyo market players said a host of domestic factors, including economic uncertainty amid renewed talk of deflation and the sense that government initiative on this is lacking, were keeping Japanese shares under pressure.

"There's talk about government references to deflation, but we're not seeing a lot of concrete plans from them in response to this," said Hiroaki Kuramochi, head of the equity division at Tokai Tokyo Securities.

"Investors are moving in to take profits."

National Strategy Minister Naoto Kan, when asked about his remark on Monday that Japan was edging toward deflation, said it was not just his general impression but was based on objective data.

In thin trade, the benchmark Nikkei lost 61.25 points to 9,729.93 percent, while the broader Topix shed 0.4 percent to 857.00, its lowest close since mid-July.

The Democrat-led government, which took office in mid-September, is caught between a rock and a hard place in its economic management. Bond yields have risen this month as investors fret over a surge in issuance as tax revenues slide, but government stimulus is driving economic growth so a cut in state spending could send the economy back into recession.

YEN AND EXPORTERS

Some market players said Tuesday's slip may have come as people abandoned technical plays aimed at boosting the so-called "NT ratio" or "Nikkei Topix ratio," in which the Nikkei average is divided by the Topix.

Investors were taking profits in shares such as Fast Retailing and Softbank, which both figure heavily in the Nikkei's weighting.

Fast Retailing slipped 0.9 percent to 17,380 yen and Softbank fell 5 percent to 2,085 yen. GS Yuasa, which had climbed during early trade, also fell prey to profit-taking, sliding 4.4 percent to 654 yen. The dollar was flat against the yen at 89.04 yen, a day after the yen hit a one-month high of 88.75 yen on trading platform EBS on Monday.

"The way it has been recently is that Tokyo shares do not get a straightforward boost from gains in overseas stock markets," said Hideyuki Ishiguro, a strategist at Okasan Securities.

"What people are looking at pretty closely today is the foreign exchange market, with the dollar having hit levels below 89 yen," Ishiguro said.

Sony lost 0.2 percent to 2,525 yen and Panasonic Corp lost 0.3 percent to 1,201 yen. Sharp Corp rose 1.4 percent to 1,023 yen after the Nikkei business daily said the LCD panel maker will begin supplying light-emitting diode backlights for LCD TVs to Sony, expanding the two firms' LCD panel alliance.

Sharp will begin supplying Sony with LED backlights, which make up roughly 20 percent of the cost of an LCD TV, in December, the paper said.