The Nikkei average ended flat on Monday to halt a four-day winning streak, with early gains capped by market worries over Greece after negotiations with private creditors failed, raising the stakes for a meeting later in the day at which euro zone finance ministers will decide terms for a debt restructuring.
Olympus Corp, battling to emerge from a $1.7 billion accounting scandal, surged more than 8 percent after the Tokyo Stock Exchange kept it listed, meaning it will be easier to raise capital, though with a special designation for firms needing to urgently improve internal management.
It topped the main board as the heaviest traded share by turnover after also getting a boost from a report that Sony Corp is the leading contender among firms jostling for an equity stake in it. Among recently battered electronics makers, Sony advanced 4 percent to top the Topix core 30 list, while Toshiba Corp jumped 4.3 percent. "I think there is a sense that these companies got a late start to the rally in Japanese stocks and were oversold recently, and investors are buying them back now," said Toshiyuki Kanayama, a senior market analyst at Monex Inc.
The benchmark Nikkei ended at 8,765.90 after rising 3.1 percent last week, while the broader Topix gained 0.2 percent to 756.79. The Nikkei is up 3.7 percent so far in January and if current gains continue to the end of the month it will be its best January performance since 1999. Trading volume was moderate, with 2.01 billion shares changing hands on the main board, against the six-week high of 2.6 billion shares on Friday.
Eurozone finance ministers will decide later in the day what terms they are ready to accept for a Greek debt restructuring as part of a second bailout package for Athens. Resolving the issue of a debt swap is essential to putting Greece's debt on a sustainable path and avoiding a messy default that could threaten the whole currency bloc. "Euro/yen started off the day with selling, and if the euro breaks below the 99 yen level Tokyo markets will become alarmed," said Hiroyuki Fukunaga, CEO at Investrust.
The single currency was trading at 99.32 yen. Despite anxiety over Europe, market participants said last week's rally was clearly a sign of improving investor sentiment. "Although the situation in Europe continues to be a concern, investors are looking to the strength of the US economy, which is bringing cash back to equities from commodities and bonds," said Hajime Nakajima, a sales trader at Cosmo Securities in Osaka.
Masatoshi Kikuchi, chief Japan equity strategist at Bank of America Merrill Lynch in Tokyo, told a briefing that despite positive economic data suggesting a stronger recovery in the United States, many Japanese stocks with a strong presence in the country had remained weak. Among some of the bank's recommended stocks with high exposure to the US were Japanese automakers as well as Kikkoman Corp, Takeda Pharmaceutical Co and Bridgestone.
Megabanks and securities outperformed the broader market, with Sumitomo Mitsui Financial Group, Mitsubishi UFJ Financial Group and Mizuho Financial Group rising between 1.1 and 1.7 percent, while Nomura Holdings jumped 1.8 percent. Among the day's losers were Panasonic Corp, which shed 1.4 percent after Deutsche Bank downgraded the electronics maker to "hold" from "buy" and slashed its target price to 700 yen from 1,180 yen.
A Deutsche Bank report said despite strength in some of Panasonic's businesses "we expect the strong yen to hurt the business environment, and further restructuring could degrade its financial/earnings capability, an outcome likely to make valuations less compelling. The shares are historically low, and for a full-fledged recovery it will need to revamp operations/strategy to address the new environment." On Friday, Moody's investment service downgraded the debt rating of Panasonic and said its financial profile had deteriorated since it bought out its two major consolidated subsidiaries, Sanyo Electric and Panasonic Electric Works, last April.