September 1, 2014 / 2:15 AM / 3 years ago

Nikkei's gains limited by worries over Japan's recovery

* Nikkei up slightly, led by gains in constructors
    * Fears of bigger-than-expected sales tax hike impact cap
    * Nisshin Steel sinks on share offering

    By Hideyuki Sano
    TOKYO, Sept 1 (Reuters) - Japanese shares edged up on
Monday, led by gains in some mid- and small-cap shares, but the
advance was mostly capped on worries the Japanese economic
recovery from a tax hike earlier this year may be weaker than
initially thought.
    The Nikkei share average rose 0.2 percent to
15,455.44, reversing its fall last week from a high around
15,628, and taking heart from Wall Street's advance on Friday
with the S&P 500 index closing at a record high ahead of
Monday's Labor Day holiday.
    Still, many large-cap shares were listless as geopolitical
concerns added to an already shaky outlook for Japan's economy,
due to soft domestic consumption and lacklustre exports.
    "People can't come up with any scenarios for a rally in
large-cap shares. So, they are taking the easy way out by
dealing in smaller shares at the moment," said a trader at a
Japanese brokerage.
    A case in point was construction companies, which gained 1.1
percent to become the top performing sector,
supported by hopes of a building boom ahead of the 2020 Tokyo
Olympic Games.
    Kajima Corp rose 0.9 percent while Kumagai Gumi
 jumped 5.7 percent to hit an eight-year high.
    Still, there is a growing perception that Japan's recovery
is not so strong after a 6.8 percent contraction in April-June
following a sales tax hike in April.
    "The Japanese economic recovery seems weaker than initially
expected. Consumption has fallen more than expected," said
Hiroshi Ono, the head of equity investment at Sumitomo Life
    Such worries are probably the main cause of the Nikkei's
underperformance in recent weeks, market players say. 
    The Nikkei fell 1.3 percent in August, compared to 2.0
percent gains in MSCI's gauge of worldwide stock performance
, even as the yen weakened 1.0 percent against
the dollar.
    Nisshin Steel fell 7.9 percent after the steelmaker
announced on Friday it would offer up to 10.7 billion yen of its
own shares.
    Both the broader Topix and the new JPX-Nikkei Index
400 gained 0.2 percent.

 (Editing by Simon Cameron-Moore)

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