The Tokyo stock market's broad TOPIX index rose for the 10th straight session on Monday, its longest winning streak in 14 years, helped by confidence in Japan's economic recovery and strength in banking stocks.
But a fall in the shares of telecom giant Nippon Telegraph and Telephone Corp (NTT) pushed the benchmark Nikkei average lower.
Japanese retail sales lent support to the market, with data issued before the opening bell showing they rose 0.8 percent in July from a year earlier, beating economists' median forecast of a 0.5 percent rise.
Gainers were paced by the country's biggest bank, Mizuho Financial Group Inc, which said last Friday it would repay $2.19 billion of public funds - another sign of improving financial strength in the banking sector.
That positive sentiment was enough to nudge the TOPIX, which covers all first-section shares on the Tokyo exchange, 0.02 percent or 0.24 point higher to 1,138.02.
Its 10-session climb is its longest since April 27-May 16, 1990, when it rose for 11 consecutive sessions.
"The TOPIX 10-day run has come amid comparatively low turnover on the back of strength in banking stocks, especially due to the take-over tussle between Mitsubishi Tokyo and Sumitomo Mitsui for the hand of UFJ," said Nagayuki Yamagishi, senior strategist at UFJ Tsubasa Securities.
He said that various factors keeping investors on the sidelines - the US Republican convention in New York between August 30 and September 2, Japanese industrial production data on Tuesday and the US jobs report on Friday - made it difficult for the Nikkei to break out of its recent trend.
The likelihood of fierce new competition for Japan's top telecoms operator, NTT, pushed the tech-heavy benchmark Nikkei 0.22 percent or 25.06 points lower, retreating from Friday's three-week closing high.
NTT, the biggest percentage loser in the Nikkei average, fell 5.71 percent to 479,000 yen, hit by ratings downgrades after a report, subsequently confirmed, that rival Softbank Corp was starting a cut-rate, fixed-line phone service.
Some investors, however, saw the slide as temporary.
"Softbank tends to make grand plans but it's debatable as to whether this will turn into a positive development for the company in the near future," said Kazunori Ohtomo, a senior fund manager at STB Asset Management.
"NTT shares have long been factoring in this type of development and I think the fall has gone too far," he said.
Losses in the telecoms sector were compounded by growing disenchantment with No 2 telecoms firm KDDI Corp, as it faces stiffer competition from top mobile phone operator NTT DoCoMo Inc
That helped prompt a rating downgrade by Credit Suisse First Boston and KDDI shares fell 2.85 percent to 545,000 yen.
Mizuho, the second largest percentage gainer among the Nikkei 225 issues, jumped 4.47 percent to 444,000 yen.
Rivals were firm with third-largest bank Sumitomo Mitsui Financial Group Inc moving 1.38 percent higher to 663,000 yen and smaller rival UFJ Holdings Inc advancing 1.12 percent to 541,000.
After the close, a financial industry source said the Supreme Court had ruled in favour of UFJ in a dispute over the planned sale of its trust bank unit to Sumitomo Trust & Banking Corp.
UFJ can now abandon that plan and include the unit in talks on a full merger with Mitsubishi Tokyo Financial Group (MTFG).
Steel stocks found higher ground, with JFE Holdings Inc, the country's second-largest steel maker, putting on 1.76 percent on expectations of an upward revision to earnings.
After the market close, it announced it had raised its operating profit forecast for this business year ending next March by 40 percent.
Trading was slow, although volume picked up from Friday, with 986.90 million shares changing hands compared with 919.04 million on Friday. Advancers outnumbered decliners 710 to 676.
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