Japan's Nikkei flat after two days of gains

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By Taiga Uranaka

TOKYO, June 2 (Reuters) - Japan's Nikkei average was flat on Monday, with gains by exporters like Sony Corp (6758.T) offset by profit-taking on the market's sharp rise late last week.

After two days of gains, the market gyrated between positive and negative territory. Mitsubishi UFJ Financial Group (8306.T), Japan's largest lender, was up 3.3 percent by midday after dipping immediately after the opening.

"Profit-taking is naturally following the market's strong rise last week," said Kenichi Hirano, operating officer at Tachibana Securities.

By midday on Monday the market had gained 21.7 percent from the year's low hit on March 17 on receding pessimism about the credit crisis, with the more upbeat mood prompting investors to move money from perceived safety of bonds to equities.

"The recent trend of selling bonds and buying equities is continuing," said Norio Shimura, deputy head of the equity department at Chuo Securities, adding that retail investors were also coming back to the stock market.

Still, he said the market's gains are likely to be limited, citing growing concerns about inflation.

Sony rose 1.7 percent to 5,370 yen after Goldman Sachs added the company to its conviction buy list, and upgraded its rating to "buy" from "neutral", saying the consumer electronics giant's earnings risk has subsided as the yen's rise versus the dollar has stalled.

Mitsubishi UFJ rose to 1,114 yen. Japan's largest brokerage Nomura Holdings Inc (8604.T) gained 2.9 percent to 1,843 yen.

ELECTRIC CAR

Some car battery makers rose after the Nikkei business daily reported that Japan Post Service, the mail delivery unit of the Japan Post Group, plans to switch its fleet of 21,000 vehicles to battery-powered cars starting this business year.

GS Yuasa Corp (6674.T) jumped 6 percent to 422 yen and Furukawa Battery Co Ltd (6937.T) jumped 12.6 percent to 687 yen.

"Retail investors reacted to the news of the electric car," said Chuo Securities' Shimura.

Mitsubishi Motors Corp (7211.T) also gained 4.3 percent to 195 yen. The automaker has said it plans to roll out electric cars to corporate users in summer 2009 and to general consumers in 2010.

Trade picked up, with some 1.1 billion shares traded on the first section of the Tokyo stock market compared to last week's morning average of 857 million.

Advancing shares outnumbered decliners by 881 to 689. (Editing by Michael Watson)