Japan's Nikkei average trimmed earlier losses and ended flat on Monday after Dubai said it had received $10 billion from fellow UAE member Abu Dhabi, easing fears of a potential debt default that had rattled global markets. Kajima Corp and other construction firms turned positive after the news, but recent gainers such as Toyota Motor Corp lost steam and weighed on the benchmark Nikkei, which had rallied 2.5 percent on Friday.
Construction firms had been under pressure earlier after the Nikkei business daily said the Dubai government and its affiliated firms owe non-financial Japanese companies, including construction firms, roughly $7.5 billion in credit that had not been collected as of October 31.
"The market welcomed the news about the rescue of Dubai for now, keeping the Nikkei above 10,000," said Hiroaki Kuramochi, chief equity marketing officer at Tokai Tokyo Securities. "But what's more critical for the market going forward will still be currency moves and the government's economic steps." In moderate trade, the Nikkei edged down 2.19 points to 10,105.68, after earlier falling as low as 10,009.60.
The broader Topix fell 0.4 percent to 885.08. Dubai said in a statement it had received $10 billion from Abu Dhabi to help it repay a $4.1 billion Islamic bond maturing the same day. It said the excess would be used to cater to Dubai World's needs up until the end of April 2010. Kajima rose 1.1 percent to 184 yen and Shimizu Corp advanced 2 percent to 314 yen.
Japanese business morale edged up further from a record low hit earlier this year but remained negative for the sixth quarter in a row, a Bank of Japan survey showed, as the economy slowly recovers from its worst recession in six decades, but market players shrugged it off.
"Today's falls are a reaction to Friday's rally due to short-covering and show that the market still lacks investors willing to buy when the Nikkei trades above 10,000," said Yutaka Miura, a senior technical analyst at Mizuho Securities. "The BOJ survey was in line with expectations, but it reinforced uncertainty about the future such as lacklustre capital spending, in addition to currency moves.
These factors are keeping the market from rising further." Shares of Toyota slipped 1.1 percent to 3,710 yen and Shin-Etsu Chemical declined 1 percent to 5,060 yen. Mitsubishi UFJ Financial Group slid 2.9 percent to 442 yen, falling for the fourth straight session, as investors sold the stock ahead of its expected $1 trillion yen share sale.
Japan's biggest bank has said it will announce the price of its new shares as early as today. Investors often sell borrowed shares of companies before they issue new stock, with the aim of buying back shares at a lower price in the issuance. Among gainers, Japan Airlines Corp and rival All Nippon Airways climbed after the United States and Japan reached a landmark aviation agreement, a deal that eases barriers to passenger and cargo services and opens up the possibility of stronger alliances.
JAL jumped 3.2 percent to 98 yen and ANA gained 1.2 percent to 255 yen. Shares of Japan Petroleum Exploration Co advanced 2.7 percent to 4,140 yen after Iraq's Oil Minister Hussain al-Shahristani said the company and Petronas of Malaysia won a deal to develop the Gharaf oilfield, in the country's second bidding round since the 2003 US invasion. Some 2 billion shares changed hands on the Tokyo exchange's first section, slightly below last week's daily average of 2.2 billion. Declining stocks outnumbered advancing ones, 880 to 646.