The Nikkei average lost 1.5 percent on Tuesday as Astellas Pharma sank after saying it was terminating development of an arthritis drug, while resource-linked stocks were hurt by lower oil prices. Blue chip exporters such as Honda Motor Co also dragged on the market after US stocks fell on chances that lawmakers may let a federal home buyer tax credit expire.
Investors worry that the struggling US housing market could lose a crucial incentive that has spurred hopes of stabilisation in recent months. In moderate trade, the benchmark Nikkei ended the morning down 151.77 points at 10,210.85, after rising 0.8 percent the previous day to hit its highest finish in four weeks.
The broader Topix retreated 1.9 percent to 893.35. Japan's corporate earnings season heats up this week, with companies reporting later in the day including Honda and Canon Inc. Along with corporate earnings, economic indicators are a big focus this week, market players said. On Thursday, Japan will announce its industrial output data for September and the US government will report its first estimate on third-quarter gross domestic product.
Hitachi Ltd jumped 4 percent to 311 yen after the electronics conglomerate reduced its annual net loss forecast by 15 percent, bringing it nearer market expectations, with the firm citing a recovery in emerging markets, government spending and cost cuts.
Astellas dropped 6.4 percent to 3,350 yen. Oil and gas developer Inpex Corp fell 1.8 percent to 777,000 yen after oil prices declined for a fourth day to stand below $79 a barrel on Tuesday, hurt by a stronger dollar and concerns that a sluggish economic recovery would keep fuel demand low. Trading houses, which are major dealers in energy and have stakes in oil and gas projects, also slid.
Mitsubishi Corp, Japan's largest trading house, lost 4.7 percent 1,977 yen, while fellow trading house Mitsui & Co tumbled 5.5 percent at 1,235 yen and Marubeni Corp skidded 3.5 percent to 467 yen. Exporters fell, with Honda sliding 2.6 percent to 2,825 yen. Canon shed 1.9 percent to 3,580 yen and TDK Corp slipped 1.3 percent to 5,230 yen.
Among other notable stocks, Fujifilm Holdings surged 6.2 percent to 2,590 yen after Nomura Holdings raised its rating on the maker of digital cameras and high-tech film used in LCD panels, citing progress with structural reforms and hopes for better-than-expected earnings for the second quarter. Some 923 million shares changed hands on the Tokyo exchange's first section, above last week's morning average of 884 million. Declining stocks outnumbered advancing ones by more than 12 to 1.
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