The Nikkei share average slipped 0.4 percent on Friday, as investors squared their positions ahead of Japan's cabinet reshuffle and some key US economic data next week, unloading Kyocera Corp and other recent gainers.
But losses were limited thanks to gains in Canon Inc, which rose after announcing a share buyback, and Daikin Industries Ltd, which advanced after Credit Suisse upgraded it to "outperform" from "neutral". Hino Motors Ltd and Isuzu Motors Ltd rose after a news report said they would jointly develop diesel engines. Both firms denied the report.
Overall, the market saw listless trade with volume at 1.6 billion shares, compared with a daily average volume of 2.1 billion shares in July. "I don't think investors wanted to leave their positions open before the weekend," said Hiroyuki Fukunaga, chief strategist at Rakuten Securities' research division.
Investors are cautious ahead of key events such as US home sales data and Japan's cabinet reshuffle, Fukunaga said. "Politics seldom moves the market, but political uncertainty is negative," he added. The Nikkei ended down 67.35 points at 16,248.97, but finished the week up 6.4 percent to post its biggest weekly percentage gain since October 2002. The broader TOPIX index edged down 0.37 percent to 1,585.85.
The Nikkei has rebounded 6.5 percent from this year's low hit last week, but is still 11 percent off this year's high logged in February. Mitsushige Akino, chief fund manager at Ichiyoshi Investment Management Co Ltd, said the market is still in the rebound phase, although investors are ready for a bumpy ride ahead.
"It will be a test how much the market can recoup its recent losses," he said. Energy stocks fell with INPEX Holdings Inc down 2 percent at 1 million yen, snapping its two-day rise. Shares of trading firms also lost steam as profit-taking kicked in. Mitsui & Co Ltd fell 1.1 percent to 2,340 yen, having booked an 18 percent gain since Monday. Kyocera fell 1.6 percent to 10,420 yen and Advantest Corp dropped 2.3 percent to 4,200 yen, both giving up some of Thursday's gains.
But Nikon Corp climbed 2.7 percent to 3,370 yen after the company said it aims to beat its target of shipping 2.6 million digital single lens reflex cameras in the year to March 2008, helped by the introduction of new models. Some of the bank shares held firm with Mizuho Financial Group ending up 0.8 percent at 721,000 yen. Fukunaga said the strong performance in bank shares will support the market sentiment.