Japanese stocks ended almost flat on Wednesday as robust earnings by Tokyo Steel Manufacturing spurred buying in China-related shares, but rises were capped as high-techs gave up some gains from the day before.
Traders said investors were also awaiting a second batch of congressional testimony by Federal Reserve Chairman Alan Greenspan later on Wednesday for more clues on Fed thinking about interest rates and the economy.
Testifying before the Senate Banking Committee on Tuesday, Greenspan said the threat of deflation was over in the United States, possibly signalling that a rise in interest rates could be on the horizon.
Hiroichi Nishi, general manager of equity marketing at Nikko Cordial Securities Inc, said a US interest rate hike could subject US firms to greater financial costs and lead to selling of US stocks, which would encourage foreign investors to take profits on Japanese stocks as well.
"It was negative in the sense that money flows from foreign investors may dry up," he said.
The Nikkei average closed down 0.07 percent at 11,944.30, after jumping 1.6 percent the previous day.
The broader TOPIX index fell 0.06 percent to 1,203.59.
Tokyo Steel jumped 19.89 percent to 1,808 yen after the company on Tuesday issued a bullish outlook for 2004/05 and reported its parent-only operating profit soared 817 percent in the business year to March 31. Sales to east Asia, including China, by Japan's largest independent electric furnace steel-maker are growing, attracting investors.
Kobe Steel gained 2.99 percent to 172 yen and Nippon Steel Corp rose 3.61 percent 258 yen.
Shipping firm Mitsui O.S.K. Lines Ltd rose 1.73 percent to 529 yen.
Technology shares were weak, however, with Sony Corp eking out a 0.22 percent gain to end at 4,570 yen despite upward revisions to its 2003/04 earnings forecasts on Tuesday.
Sharp Corp, Japan's largest maker of liquid crystal display TVs, shed 1.23 percent to 2,000, after rising to 2,025 on Tuesday, a level last seen in June 2000.
Sharp said on Wednesday the "production yield" at its flagship LCD panel plant in western Japan is around 80 percent, suggesting a steep improvement in profitability. The news did not appear to have an immediate impact on its share price.
Sanyo Electric Co sagged 0.56 percent to 531, after climbing 4.5 percent on Tuesday, while Canon Inc fell 2.17 percent to 5,400 yen after hitting a seven-week high the previous day.
Optical glass maker Hoya Corp was also hit by profit-taking and closed down 0.72 percent at 11,070 yen after saying on Wednesday its net profit doubled to a record in 2003/04.
The stock hit a four-year high of 11,560 yen earlier this week on expectations of strong earnings.
Trade volume increased, with 1.733 billion shares changing hands on the first section, up from 1.616 billion on Tuesday.
Decliners outnumbered advancers 775 to 684.
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