The Nikkei average snapped a three-day winning streak on Tuesday, slipping 0.66 percent in quiet trade as exporters such as Sony Corp lost ground on continued concern about the outlook for the US market. Nikko Cordial Corp jumped more than 6 percent after the Tokyo Stock Exchange said on Monday that it would not delist the brokerage over an accounting scandal.
The surprise decision by the exchange could force US bank Citigroup to sweeten its buyout offer for Japan's third-largest securities firm. Both a stronger yen and nagging concern about the health of the US economy, a key market for Japanese goods hit exporters.
"We're seeing a turnaround from the weaker yen," said Mitsushige Akino, chief fund manager at Ichiyoshi Investment Management. "We've had something of a rebound after the sharp sell-off. But for the market to move any higher we need some supporting factors. One support would be an indication of an upturn in the US economy," Akino said.
The Nikkei fell 113.55 points to 17,178.84 after gaining for three straight sessions. The broad TOPIX index fell 0.91 percent to 1,725.43. The yen was around 117.44 yen to the dollar when the Tokyo stock market closed. It hit a three-month high of 115.16 yen to the dollar last week.
Shares in exporters declined, with Sony losing 2.1 percent to 6,110 yen and Honda Motor Co Ltd falling 1.2 percent to 4,260 yen. A stronger yen is a minus for exporters because it crimps profits when earnings from abroad are brought home.
Nikko Cordial surged 6.1 percent to 1,490 yen after the Tokyo exchange said on Monday evening it would not delist the brokerage over an accounting problem. Citigroup announced its intention on March 6 to acquire Nikko, the third-largest Japanese brokerage, for nearly $11 billion in what would be its biggest-ever deal in Asia, but the exchange's decision could prompt shareholders to hold out for a higher price.
Trade was relatively quiet, with slightly more than two billion shares changing hands on the Tokyo exchange's first section. Trade averaged nearly three billion shares per day last week.
Declining shares beat advancers by a ratio of more than four to one. A lack of fresh factors after last week's settlement of Nikkei futures and options contracts - known as the "special quotation" or "SQ" - kept some investors from wading into the market. "There's a feeling the market has come through a tough patch after the SQ," said Masayoshi Okamoto, head of dealing at Jujiya Securities.
The market often sees volatile trade directly before derivatives contracts are settled. Shares of TDK Corp advanced 3.8 percent to 9,650 yen after Goldman Sachs said in a report on Monday it had raised its rating on the stock to "buy" from "neutral" and added it to its "conviction buy" list.
Goldman said there were emerging signs of greater selectivity and focus in the company's business portfolio. Non-life insurance companies fell after local media reported the Financial Services Agency plans to issue partial business-suspension orders to several firms for failing to pay claims for medical care and cancer policies. Mitsui Sumitomo Insurance Co Ltd declined 2.1 percent to 1,421 yen. Millea Holdings Inc, which owns non-life insurer Tokio Marine & Nichido, slipped 1.4 percent to 4,150 yen.
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