The Nikkei average scraped to its fourth straight session of gains on Tuesday, adding 0.02 percent as Olympus Corp and other exporters rose after an index of US manufacturing activity hit its highest in more than a year, boosting confidence in Japan's largest export market.
Investors shrugged off news that Japan's defence minister resigned on Tuesday over controversial remarks that appeared to accept the 1945 atomic bomb attacks on Japan, market participants said.
The gaffe added to headaches for Prime Minister Shinzo Abe, whose support rate has already been slashed by outrage over government mishandling of pension records, ahead of a July 29 upper house poll. Gains were limited due to a lack of trading factors and low trade volume, participants said.
The Institute for Supply Management's factory index rose to its highest level in more than a year on Monday, surprising the US market and lifting the outlook for Japanese exporters, which rely on demand from the United States.
"The ISM is closely watched in the United States and we are seeing the results of its rise here," said Ken Masuda, a senior equities dealer at Shinko Securities. "It looks like a plus for the US economy," Masuda said. But that was not enough to move the Nikkei beyond a narrow range and market participants said investors were hoping for news of earnings upgrades in the coming weeks.
"Plenty of people want to buy if the Nikkei slips below 18,000, but no one wants to buy above 18,200," said Takahiko Murai, general manager of equities at Nozomi Securities.
The Nikkei finished at 18,149.90 after earlier hitting its highest level since June 21. The broader TOPIX index rose 0.08 percent to 1,781.86. Trade was thin, with just 1.78 billion shares changing hands on the Tokyo exchange's first section, compared with last year's daily average of 1.93 billion shares. Declining shares outnumbered advancers 874 to 692.
Olympus, which relies on the United States and other foreign markets for more than 60 percent of its sales, rose 1.3 percent to 4,840 yen. Shares of Nintendo Co Ltd gained 2.1 percent in Osaka trade to a lifetime high of 46,700 yen, on continued strong sales of its Wii game console.
The Wii outsold rival Sony Corp's PlayStation 3 by a ratio of more than 6 to 1 in June in Japan, according to game magazine publisher Enterbrain, solidifying its leading position. The Wii's lead against the PS3 was 5 to 1 in May. Shares of Imperial Hotel Ltd, which operates one of Japan's best known hotels, jumped by their daily limit of 500 yen on the Tokyo exchange's second section.
US investment fund Cerberus Capital Management LP has decided to sell its roughly 40 percent stake in the company, the Nikkei business daily said in its evening edition on Tuesday.
Shares of kabu.com Securities Co Ltd gained 3.5 percent to 179,000 yen after Goldman Sachs added the company to its "conviction buy" list, citing growth in new accounts due to the online brokerage's alliance with Mitsubishi UFJ Financial Group Inc Shares of Daiwa Securities Group Inc jumped 3.8 percent to 1,352 yen after Goldman Sachs raised its rating on Japan's second-largest brokerage to "neutral" from "sell", citing declines in the share price.
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