TOKYO, Dec. 16, 2010 (Xinhua News Agency) -- Tokyo stocks ended largely flat for the second successive day, with the key Nikkei stock index edging up a mere 0.01 percent on Thursday as concerns about the market overheating spurred profit-taking and ongoing concerns about Europe's debt crisis dampened the market mood.
Brokers said that the situation in Europe is far from being contained and the fact that new austerity measures or credit downgrades are constantly being announced means that investors are reluctant to take up firm positions when it comes to issues connected to the fluctuating single-currency zone.
"We've seen debt problems in Europe coming back and forth. It is not having a big impact on the market but is making it hard to take large positions,'' said one local securities manager.
With Moody's Investors Service Inc. warning that they may downgrade Spain's debt rating, it was no surprise that profit- taking was pervasive Thursday as the yen's retreat against the U.S. dollar gave market players the perfect excuse to lock in gains ahead of the upcoming seasonal holidays, analysts said, although others said it was too early to offload Japanese shares.
"The yen is in a weakening trend against the backdrop of gains in U.S. bond yields, so concerns the yen will appreciate further are easing," said Katsuhiko Hiroshige, general manager of equities research at Bansei Asset Management Co. "There's no reason to sell Japanese stocks."
The consensus however among traders was that profit-taking may cause the market to lose steam temporarily, but this does not equate to an imminent downtrend for Japanese equities.
"Recent selling in bonds is suggesting a shift to the equities market from bonds," said Mattia Ciancaleoni, director of equity sales at Citigroup (NYSE:C) Global Markets Japan.
"There is a sign of recovery in the market, so I don't think investors want to take huge vacations to miss more positive signs like that in the next few weeks," Ciancaleoni said, in contrast to some of his peers.
The 225-issue Nikkei Stock Average edged up 1.51 points from Wednesday to 10,311.29, which the broader Topix index of all First Section issues on the Tokyo Stock Exchange rose 1.42 points, or 0. 16 percent, to 903.84.
The dollar hit a near two-and-a-half month high against the yen, as yields on U.S. 10-year Treasuries advanced to a seven-month high. Investors cheer a strong dollar as it boost revenue made overseas by Japanese exporters, when the yields are repatriated.
Subsequently, Honda climbed 1.3 percent to 3,215 yen, its highest close since April 30 and Suzuki Motor Corp. (OOTC:SZKMY) , a maker of automobiles and motorcycles, gained 1.2 percent to 2,055 yen, after Credit Suisse Group (NYSE:CS) AG initiated coverage of the company at "outperform." Meanwhile, Canon Inc. (NYSE:CAJ) , added 1.2 percent to 4,145 yen.
Japanese financial issues were firm with Sumitomo Mitsui Financial Group (NYSE:SMFG) gaining more than 2 percent to 2,856 yen and Mizuho Financial Group (NYSE:MFG) rising 2.7 percent to 150 yen. Top-lender, Mitsubishi UFJ Financial Group (NYSE:MTU) , for its part rose 1.4 percent to close at 435 yen.
Trading volume on Thursday fell to 2.02 billion shares on the Tokyo Exchange's First Section, down from Wednesday's volume of 2. 06 billion shares, with advancing issues outnumbering declining ones by 805 to 690.
