Japan's Nikkei stock average edged up 0.6 percent on Wednesday after a US stimulus plan was expanded, led by Tokyo Electron and other chip-related shares boosted after a rival filed for insolvency. Banks extended gains made the previous day when the government said it would use public funds to support non-financial firms, reducing the risk of bad loans. Advances made by their US peers also helped.
But the generally dire economic situation was emphasised as Canon Inc reported an 81 percent fall in quarterly profit and predicted a two-thirds decline this year, hit by slumping demand for cameras and office equipment and a stronger yen.
"The yen is likely to remain strong over the longer term, there are just too many fundamental problems," said Norihito Fujito, general manager at the investment research and information division of Mitsubishi UFJ Securities.
The benchmark Nikkei got an additional boost from a rise in US stock futures after a key US Senate panel expanded an economic stimulus package to about $887 billion on Tuesday. Dow Jones futures gained 1.5 percent and S&P futures rose 2 percent, pointing to a higher open on Wall Street.
"This may help boost the Nikkei average to near its 25-day moving average, though caution ahead of earnings could prevail," said Hiroaki Kuramochi, chief equity marketing officer at Tokai Tokyo Securities.
Gains were capped by additional wariness before the end of a Federal Reserve board meeting later in the day, with market players waiting to see what impact the results would have on the yen, which retreated against the dollar on Wednesday. By afternoon, the dollar had gained 0.3 percent to 89.26 yen. The Nikkei gained 45.22 points to 8,106.29 in very choppy trade, extending gains made during a 4.9 percent rally on Tuesday.
The broader Topix slipped 0.1 percent to 804.33. Tokyo chip firms joined Asian peers in climbing on hopes that the sector's chronic supply glut would ease after German rival Qimonda filed for insolvency.
Tokyo Electron surged 7.9 percent to 3,430 yen, becoming the biggest contributor to the Nikkei 225 by volume weight. It was followed closely by Advantest Corp which rose 5 percent to 1,251 yen, while Elpida Memory surged 9.1 percent to 609 yen. Some market players said many chip-related shares may have also been scooped up on bargain-hunting.
"When the economy bottoms out, chip-related shares are often among those which are the fastest to turn around, so some investors are likely snapping up the shares today as bargains even though it's still too early to say we're on a rising trend," said Mitsubishi UFJ's Fujito.
After the close, Advantest, the world's biggest maker of chip testers, posted its fourth straight quarterly loss as chip makers froze spending plans and orders fell to their lowest on record. Mitsubishi UFJ Financial Group, Japan's largest bank, rose 1.2 percent to 503 yen, while No 2 bank Mizuho Financial Group gained 1.3 percent to 233 yen and Sumitomo Mitsui Financial Group climbed 1.2 percent to 3,360 yen.
But Nomura Holdings, Japan's largest brokerage, fell after posting a record $3.8 billion quarterly loss, hit by the cost of integrating Lehman Brothers' operations, soured trades and its exposure to Iceland and Bernard Madoff. Nomura lost 2.2 percent to 625 yen. Trade was moderate on the Tokyo exchange's first section, with 1.90 billion shares changing hands, compared with last week's daily average of 1.77 billion. Declining stocks outpaced advancing ones, 812 to 755.
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