The Nikkei average edged down 0.19 percent on Tuesday as losses in Honda Motor Co and other blue chip stocks were mostly offset by gains in Softbank Corp and recently battered stocks such as banks. Auto makers and technology companies such as Kyocera Corp were hit by concerns about holiday spending in the key US market.
But Softbank rose 2.4 percent as a recovery in small-cap shares encouraged retail investors to buy shares of the Internet and telecoms group. Shares of banks such as Mitsubishi UFJ Financial Group, as well as steel makers including JFE Holdings Inc, also gained on bargain-hunting. Soichiro Monji, chief strategist at the equity management department of Daiwa SB Investments, said the market was solid at the bottom as it had digested negative domestic factors such as weak personal spending.
Japanese retail sales rose 0.1 percent in October from a year earlier, stronger than forecasts for a 0.1 percent fall and a 0.2 percent drop in September, but indicating spending remained lacklustre. The Nikkei closed down 30.12 points at 15,855.26, after rising 0.96 percent on Monday.
The broader TOPIX index gained 0.14 percent to 1,555.11, extending a 0.97 percent advance in the previous session. Trade volume rose to 1.71 billion shares from 1.51 billion on Monday. Advancers surpassed decliners by a ratio of 58 to 34. Market participants said they expected trade to stay in a narrow band for the time being.
"The market is unlikely to fall much from current levels as it looks undervalued compared with overseas stocks," said Susumu Abe, manager at the information and investment department of Mito Securities Co. But upside will also be limited as investors stay cautious before the release of key economic indicators later this week, including consumer price data on Friday, and the Bank of Japan's next policy meeting in mid-December, he said.
Bank of Japan Governor Toshihiko Fukui provided no fresh hints on the timing of the next rate hike in his speech on Tuesday, repeating that the BoJ would adjust rates gradually based on the economy and prices. After the market closed on Tuesday, oil distributor Showa Shell Sekiyu KK announced a secondary offering of nearly 9.2 million shares worth about 12 billion yen ($103.5 million) at the current stock price.
Nifty Corp, an Internet service provider wholly owned by Japanese electronics group Fujitsu Ltd, on Tuesday priced its public offering at 14.6 billion yen ($125.9 million), 16 percent less than it had hoped to raise. Idemitsu Kosan Co gained 4.7 percent and Cosmo Oil Co rose 2.4 percent as the oil refiners and two other Japanese firms said they had agreed to take a stake in a new Qatari refinery project expected to cost $800 million.
Shares of KDDI Corp rose 0.9 percent after Merrill Lynch raised its rating on Japan's second-largest mobile phone operator to "buy" from "neutral". Toyama Chemical Co Ltd, a drug maker focused on antibiotics, gained 4.8 percent on news that South Korea had found a second case of highly pathogenic bird flu at a poultry farm, after confirming on Saturday it had its first outbreak in three years of the H5N1 strain.
Honda fell 1.7 percent, getting no help from a newspaper report that it would boost its dividend payout ratio to about 30 percent from 20 percent in two to three years. Sanyo Electric Co fell 1.2 percent, adding to a fall of nearly 6 percent from the previous session on the electronic maker's announcement that it would post losses for a third straight year due to weak sales and restructuring costs.