The Nikkei average finished up 0.36 percent on Tuesday, recouping some losses from the previous day's decline as Olympus Corp and Nikon Corp gained after both camera makers posted big rises in quarterly earnings and raised their forecasts.
But gains were limited as shares of Credit Saison Co Ltd and other consumer lenders lost ground due to a report that they are now approving fewer loans following a move to lower the maximum interest rate they can charge. After the close of trade, Toyota Motor Corp reported a 19 percent rise in quarterly profit and left unchanged its full-year forecast for an eighth straight year of record earnings.
Investors were largely focused on the handful of companies - such as Olympus and Nikon - whose earnings have outstripped expectations, market participants said. "Unless a company posts really strong earnings, investors are reluctant to buy. It is hard to imagine the market advancing much further at the moment," said Masaki Iso, chief investment officer at Yasuda Asset Management. "The results of third-quarter earnings are largely factored in as we've been advancing steadily since December," Iso said.
The Nikkei finished up 62.06 points at 17,406.86. It fell nearly 1.2 percent on Monday, booking its biggest one-day loss in a month. The broad TOPIX index rose 0.94 percent to 1,732.42. Olympus climbed 3.9 percent to 4,050 yen and Nikon advanced 5.4 percent to 2,750 yen.
Olympus said its October-December operating profit rose 66 percent from a year earlier, while smaller rival Nikon saw its profit jump 85 percent from a year earlier. Lender Credit Saison dropped 4.4 percent to 4,090 yen, becoming the biggest drag on the Nikkei.
The Nikkei business daily reported on Tuesday that consumer lenders are now adopting tougher screening rules for risky borrowers following a move to lower the maximum interest rate they can charge on loans. The newspaper said the combined loan approval rate at Japan's top four consumer lenders had fallen to 44 percent in December from 60 percent as of April 2006.
Silicon-wafer maker Sumco Corp jumped 9.1 percent to 4,430 yen. Helped by rising output of 300mm wafers, the company is likely to book a group recurring profit of about 105 billion yen ($873 million) for the year to January 2008, the Nikkei daily said on Tuesday.
Shares of Toyota are likely to be a focus for market participants on Wednesday. The auto maker could face selling after it left its profit forecast unchanged, said Mitsushige Akino, chief fund manager at Ichiyoshi Investment Management. Toyota closed up 1.8 percent at 7,960. Rival Honda Motor Co Ltd gained 2 percent to 4,620 yen recovering from a loss in the previous session.
Shares of Japan's large banks declined after Goldman Sachs said it cut its rating on the sector to "neutral" from "attractive", citing doubts that management will invest aggressively enough in retail operations to boost long-term profit growth rates.
Shares of leader Mitsubishi UFJ Financial Group Inc lost 0.7 percent to 1.41 million yen, while second-ranked Mizuho Financial Group Inc gave up 0.5 percent to 833,000 yen. Sumitomo Mitsui Financial Group, Japan's third-largest bank, fell 0.9 percent to 1.16 million yen.
Trade volume remained active with 2.3 billion shares changing hands, compared to last year's daily average of 1.9 billion shares. Declining shares outnumbered advancers by a ratio of more than 2 to 1.