Japan's Nikkei share average fell 0.27 percent on Monday, snapping a six-session winning streak as profit taking offset advances by energy-related issues such as Nippon Oil Corp on record-high crude oil prices.
Pricier crude prompted investor concern about the wider effect on economies and company profits. Shares of banks such as Sumitomo Mitsui Financial Group and exporters were among those hit.
"The market is running out of breath," said Masaharu Sakudo, an adviser at Tachibana Securities. "Investors are now suddenly feeling the weight of oil prices, which they had been less concerned about" last week.
The Nikkei fell 30.68 points to 11,483.35. It had risen a total 3.16 percent in the previous six sessions to its highest close since April 14.
The rally marked the Nikkei's longest winning streak since an eight-day gain that ended on March 7.
The broader TOPIX index fell 0.14 percent to 1,170.65.
US light crude futures hit an all-time high above $59 a barrel in Asia on Monday, extending last week's surge as a threat against Western consulates in Opec member Nigeria jolted traders already worried about tight supplies.
Refiners and other oil stocks got a boost, however. The oil sector rose 3.21 percent, the best performer on the Tokyo bourse's first section.
Akio Yoshino, general manager at Societe Generale Asset Management, said higher oil prices would eventually boost costs at Japanese firms, but long-term supply contracts have lessened the risk of material price volatility on companies.
"I think the market will see the real impact of higher oil prices on companies sometime after the summer, when the momentum in their earnings growth is expected to slow," he said.
Consumer spending, currently Japan's main engine driving the economy forward, is expected to slow after the summer as well, when the effect of seasonal bonuses fades, he said.
But few are afraid of the market's downside risk in the near future as economists expect an improvement in corporate sentiment in the Bank of Japan's "tankan" survey on July 1, analysts said.
A Reuters poll of 20 economists on the quarterly survey produced a median forecast of 15 for the tankan's headline figure, the diffusion index for large manufacturers.
That would be a slight improvement after the index slumped to 14 in the March survey from 22 in December.
Among gainers, Nippon Oil, Japan's biggest refiner, rose 3.9 percent to 778 yen. Gas and oil project developer AOC Holdings Inc jumped 4.7 percent to 1,728 yen.
Nippon Mining Holdings Inc, which owns Japan's biggest copper smelter and the country's sixth-largest oil refiner, was up 2.7 percent at 678 yen, its highest close since listing in 2002.
Auto makers lost ground following last week's advances that were helped by the yen's fall to an eight-month low against the dollar. Industry leader Toyota Motor Corp shed 0.5 percent to 3,930 yen, after hitting a nine-week closing high on Friday.
A weaker yen makes Japanese goods more competitive abroad.
Sumitomo Mitsui, Japan's third-biggest lender, fell 0.7 percent to 737,000 yen. It had risen more than 5 percent this month and hit a three-month closing high on Friday. Mizuho Financial Group lost 0.8 percent to 515,000 yen.
In contrast, Tochigi Bank Ltd soared 6 percent to 705 yen after the Mainichi daily reported on its Web site on Sunday that the regional bank and Mizuho Financial were candidates to take over bankrupt Ashikaga Bank's operations.
Ashikaga Bank, based in the same Tochigi prefecture, went under in November 2003 and has been nationalised.
Hoya Corp rose 0.9 percent to 12,530 yen, extending morning gains after president Hiroshi Suzuki said in an interview with Reuters that Hoya wants to spend up to 120 billion yen ($1.1 billion) on two big merger-and-acquisition deals this year to boost its eyeglasses and electro-optics businesses.
Investors have been waiting to see how Hoya's management would use a growing cash pile that totalled 112.87 billion yen as of March 31.
Tokyo's trade volume edged down with 1.52 billion shares changing hands, although volume still remained above last year's daily average of 1.45 billion shares.
Advancers outnumbered decliners 836 to 665.
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