The Nikkei average slipped on Thursday as Tokyo Electric tumbled, dragging down other utilities after the government's chief spokesman said its shareholders will be asked to help support the company as it compensates victims of a prolonged nuclear crisis.
Chip equipment makers fell after Goldman Sachs cut its rating on the shares of Intel Corp, the world's biggest chipmaker, to "sell" from "neutral" on slowing processor shipments and increased competition from ARM-based processors. The utility and gas index fell 3.4 percent to become the biggest-losing sector, dragged down by Tokyo Electric (Tepco) which tumbled 8 percent to 358 yen.
Shares in all nine major power companies were also hit after Prime Minister Naoto Kan on Wednesday called for debate on whether to deregulate Japan's power industry, dominated by the nine regional firms that both generate and distribute electricity. Chubu Electric slumped 5.1 percent to 1,282 yen and Kansai Electric shed 4.4 percent to 1,399 yen.
The benchmark Nikkei average closed down 0.4 percent at 9,620.82, while the broader Topix shed 0.72 percent to 831.89. The Nikkei had gained as much as 0.7 percent in early trade on rising commodities, but reversed those gains before the midday break. Volatile moves were exaggerated by weak volume, which fell to the lowest since April 26. On the main board 1.7 billion shares changed hands, below last week's daily average of 2.1 billion shares.
Chip equipment makers with a heavy weighting in the Nikkei tumbled after Intel's rating cut. Dainippon Screen Manufacturing fell 5.3 percent to 676 yen, the second-largest drop on the Nikkei, while Advantest Corp dropped 3.4 percent to 1,481 yen. "Intel has always been very important for the Japanese market, and this rating cut is having a major impact on chip-related shares which were already battered after the earthquake," said Cosmo Securities' Shimizu.
The Nikkei has tumbled some 7.8 percent since the earthquake, while Asian stocks outside Japan have gained about 6 percent. Losses in the benchmark were limited with investors citing continued buying of Japanese stocks by foreign players as one factor supporting the Nikkei. Basket orders from European investors for some 10 billion yen were detected at the beginning of trade on Thursday.
"It seems that apart from rises in commodities, the fact that foreigners have continued to buy Japanese stocks despite recent weakness is boosting confidence among investors," said Hideyuki Ishiguro, a supervisor at Okasan Securities. Foreign investors' net purchases of Japanese shares stood at 32.0 billion yen ($391 million) last week, down from a revised 46.6 billion yen the week before, government data showed on Thursday. Inpex Corp , Japan's biggest oil and gas developer, outperformed the market and gained 0.2 percent to 554,000 yen while Sumitomo Metal Mining added 0.2 percent to 1,317 yen after commodities steadied following big gains on Wednesday.