Japan stocks falter but bank recovery supports
(Adds comments and stocks)
TOKYO, Dec 18 (Reuters) - Japanese stocks fell for the fifth day on Tuesday, tracking a fall on Wall Street sparked by fears of stagflation amid a housing slump and surging prices.
While the Tokyo market pared much of its earlier losses after bank stocks including Mitsubishi UFJ Financial Group Inc (8306.T) rebounded, participants were not celebrating their recovery from a recent sell-off.
"This is a typical move at the year-end. Bank and property shares were bought on short-covering," said Takahiko Murai, general manager of equities at Nozomi Securities.
He said the worst was not over for bank shares given the bleak outlook for the U.S. and Japanese economies.
Rather, falls in blue-chips like Matsushita Electric Industrial Co Ltd (6752.T) and Komatsu Ltd (6301.T) were symptomatic of the Japanese stock market's problems.
"I feel a chill," he said. "Shares that should lead the indexes' rise did not turn upward."
The Nikkei average .N225 ended the morning session down 0.8 percent at 15,132.48 and the broader TOPIX index fell 0.5 percent to 1,465.90.
The benchmark Nikkei has fallen in the last four losing sessions, shedding nearly 5 percent.
U.S. stocks tumbled on Monday on concerns that a persistent housing slump, combined with surging prices, poses the threat of 1970s-style stagflation.
Stagflation is a period of rising prices amid stagnant consumer demand, lack of growth in output and high unemployment.
Its advent could pose a dilemma for the Federal Reserve as policies aimed at boosting growth could fuel inflation, while policies to fight inflation could hobble an economy grappling with fallout from the housing slump.
Panasonic maker Matsushita lost 2.8 percent to 2,250 yen and earth-moving equipment maker Komatsu shed 3.3 percent to 2,960 yen.
Trade on the first section of the Tokyo bourse saw 950 million shares changing hands compared with last week's morning average of 1 billion. Decliners outnumbered advancers by 909 to 694.
BANKS REVERSE
Bucking the trend, Japan's three biggest bank turned positive after opening lower.
No.1 Mitsubishi UFJ gained 2.2 percent to 1,051 yen, while No.2 Mizuho Financial Group (8411.T) rose 1.7 percent to 542,000 yen and third-ranked Sumitomo Mitsui Financial Group (8316.T) was up 0.9 percent at 832,000 yen.
Banks were among the hardest hit in the recent sell-off, with Mitsubishi UFJ losing 16.3 percent in the previous four sessions.
Property shares joined the rebound, with Mitsubishi Estate (8802.T) gaining 2.4 percent to 2,590 yen. It had lost 15.2 percent in the previous four sessions.
Heavy machinery maker IHI Corp (7013.T) surged 6.8 percent to 237 yen after Goldman Sachs gave it a "buy" rating. The rating had previously been suspended.
IHI's troubles surfaced in September when it shocked investors with a loss warning for the current financial term due to deteriorating margins on plant and engineering projects for which costs had spiralled out of control, prompting the Tokyo stock exchange to place the firm on its supervisory list.
"Both internal and external committees have concluded there were no fraudulent statements," analyst Kunio Sakaida wrote. "If delisting risk can be eliminated, we believe the stock is attractively valued." (Editing by Michael Watson)
