The Nikkei average slipped 0.19 percent on Thursday as Sony Corp. rose, helped by Sony Ericsson's stronger-than-expected earnings, but bank shares rang up losses on a bearish UBS report.
Eisai Co. Ltd. and other pharmaceutical shares, which have drawn buyers seeking defensive stocks, came under profit-taking pressure. But a decline in US crude oil to a new 2006 low helped shares of shipping and airline companies extend gains on hopes that they will benefit from lower fuel costs.
After the market closed, Fast Retailing, operator of the Uniqlo casual-wear chain, reported a 19 percent profit gain for 2005/06 and forecast 10 percent growth this business year.
Its shares ended up 1.9 percent at 11,570 yen. Japan's largest retail group, Seven & I Holdings Co., posted a strong half-year profit and raised its full-year forecast. It ended unchanged at 3,780 yen. Despite recent gains, the Nikkei's struggle to move higher reflects investors' cautious stance about a slowdown in the United States, a key export market for Japanese goods, said Yoshinori Nagano, chief strategist at Daiwa Asset Management.
The Nikkei fell 31.76 points to 16,368.81. The broad TOPIX index was down 0.52 percent at 1,613.64. Shares of Sony, which have been under pressure after a series of recalls of batteries it makes for notebook computers, rose for only the third time in 10 sessions, by 1.8 percent to 4,590 yen.
Sony Ericsson, Sony's mobile phone joint venture with Sweden's Ericsson, reported third-quarter pretax earnings on Wednesday that were double what analysts had expected as it said it gained market share.
Japan Airlines Corp. gained 2.8 percent to 217 yen and Mitsui O.S.K. Lines Ltd., Japan's second-largest shipping firm, gained 2.9 percent to 934 yen. The drug sector IPHAM, the best-performing sector since April with a gain of more than 13 percent, lost ground.
Eisai declined 3.3 percent 6,130 yen after hitting a lifetime high of 6,380 yen on Wednesday. Astellas Pharma Inc. dropped 2.5 percent to 5,150 yen. On Wednesday it rose as high as 5,360 yen, the highest in nearly six years.
Bank shares fell out of favour after UBS cut its target prices for four major banks Mitsubishi UFJ Financial Group Inc., Mizuho Financial Group Inc., Sumitomo Trust & Banking Co. Ltd. and Mitsui Trust Holdings Inc. citing the likelihood that few major banks would beat their first-half earnings targets.
Investment bank UBS said in a report on Wednesday it saw slow improvement in banks' spreads between deposit and lending rates and that losses on bond sales would also hurt their earnings.
Sumitomo Trust tumbled 4.6 percent to 1,248 yen and industry leader Mitsubishi UFJ lost 3.2 percent to 1.53 million yen. Trade declined from the previous session, with 1.67 billion shares changing hands on the exchange's first section. That was well below last year's daily average of 2.07 billion shares. Decliners beat advancers 929 to 643.