Japan's Nikkei share average inched up 0.06 percent on Wednesday as investors bought NTT DoCoMo Inc, Sony Corp and other issues with brighter earnings forecasts. But gains were capped as jittery investors sold steel shares and other recent winners ahead of a general election on Sunday and Nikkei futures and options settlements on Friday.
"Investors want to take a neutral stance for now. The value of their stock holdings should have gone up after recent rises anyway," said Masaharu Sakudo, an adviser at Tachibana Securities.
Uncertainty over the outcome of Sunday's general election for the lower house of Japan's parliament is making investors nervous about building new positions, analysts said, although the market expects a win for the ruling Liberal Democratic Party.
The Nikkei closed up 8.16 points at 12,607.59, while the broader TOPIX index slipped 0.06 percent to 1,285.52.
Sony gained 2.1 percent to 3,920 yen after it unveiled on Tuesday a plan to sell up to 200,000 shares in online brokerage Monex Beans Holdings Inc to the market for 25.088 billion yen ($228.8 million). This would add 18 billion yen to Sony's group pre-tax profit for the current business year to March, and 10.6 billion yen to net profit, it said.
NTT DoCoMo, Japan's largest mobile operator, advanced 3.8 percent to 193,000 yen, its highest level this year, after Credit Suisse First Boston (CSFB) raised its earnings forecast for the company.
Steel stocks became a target for profit-taking ahead of announcements on revised earnings on Thursday.
Nippon Steel Corp, JFE Holdings Inc, Sumitomo Metal Industries Ltd and Kobe Steel Ltd are expected to raise their already record-high profit estimates when they announce revised earnings outlooks for the fiscal first half and for the full year to March 2006 after setting prices for third-quarter shipments.
Nippon Steel, Japan's biggest steel maker, fell 1.2 percent to 338 yen and No 2 JFE Holdings sagged 0.9 percent to 3,240 yen.
Some bank shares extended losses after data showed Japan's diffusion index of leading economic indicators fell to a break-even 50.0 in July from 66.7 in June, suggesting waning confidence the economy was about to move convincingly out of a recent soft patch.
Mizuho Financial Group dropped 1.8 percent to 603,000 yen and Mitsubishi Tokyo Financial Group fell 0.9 percent to 1.11 million yen.
Hajime Yagi, general manager of the Japanese equity investment department at Meiji Dresdner Asset Management, said the market may have already factored in all the good news about Japan's economic recovery.
To extend gains further, improvements in US stock markets may be needed, he said.
Trade volume fell, with 1.93 billion shares changing hands, although that was still well above last year's daily average of 1.45 billion. Decliners outpaced advancers, 914 to 573.