Tokyo stocks fell Tuesday morning as a stronger yen and domestic concerns erased early gains from Wall Street's rally overnight and an advance in resource-related shares.
The 225-issue Nikkei Stock Average lost 13.76 points, or 0.14 percent, from Monday to 9,777.42. The broader Topix index of all First Section issues on the Tokyo Stock Exchange was down 3.26 points, or 0.38 percent, to 857.16.
Decliners were led by pulp and paper, air transport and rubber product issues. Major gainers included the sea transport, real estate, and iron and steel sectors.
Tokyo stocks rose at the outset after the Dow Jones index posted a one-year high Monday on better-than-expected U.S. retail sales data and Federal Reserve Chairman Ben Bernanke's comments suggesting that the Fed will maintain its ultra-easy credit policy. Resource-related shares climbed on higher oil and gold prices.
But gains were gradually trimmed as the buying incentives ran their course and the continued weakening of the U.S. dollar, trading around the 89 yen line, weighed on Japanese exporters, brokers said. A weaker dollar erodes exporter profits repatriated from overseas.
"U.S. stock indexes have been rewriting their year-to-date highs, but the Japanese market continues to lag behind," said Daiwa Securities SMBC Co. market analyst Masumi Yamamoto.
Yamamoto added that concern about the impact of massive equity financing plans on the supply-demand balance and uncertainty about the new government's policies are among the major factors chilling investor sentiment.
"Investors have also begun to lose patience as they still can't get a grasp of the scale of additional economic stimulus measures," she said. "And while yesterday's gross domestic product figures were good, wariness remains over the outlook as public investment is bound to decelerate under the Democratic Party of Japan-led government."
On the First Section, declining issues outnumbered advancing ones 1,216 to 348, with 113 others ending the morning unchanged.
Japan Airlines lost 3 yen, or almost 3 percent, to 103 yen on news that top shareholder Tokyu Corp. is taking steps toward selling at least some of its holdings in the struggling carrier.
Textile maker Daiwabo Holdings plunged 42 yen, or over 15 percent, to 231 yen after its equity finance announcement Monday fanned fears that per-share value will be diluted.
Mitsubishi UFJ Financial Group, the morning value leader, rose 4 yen, or about 1 percent, to 484 yen. Volume leader Mizuho Financial Group lost 1 yen, or about half a percent, to 171 yen.
Bucking the trend, Canon gained 90 yen, or almost 3 percent, to 3,460 yen after saying Monday it will acquire Oce NV of the Netherlands, the biggest printer maker in Europe.
Sharp rose 26 yen, or over 2 percent, to 1,035 yen on reports it will start supplying light-emitting-diode backlights for liquid crystal display televisions to Sony Corp.
Trading volume on the main section came to 861.44 million shares, down slightly from Monday morning's 868.80 million.
The TSE's Second Section index was down 11.50 points, or 0.56 percent, to 2,035.58 on a volume of 30.59 million shares. On the Osaka Securities Exchange, the near-term December Nikkei 225 index futures contract was down 20 points to 9,780.
