Tokyo's Nikkei average erased initial gains to trade lower by mid-afternoon on Tuesday as the market's rally sparked caution, prompting investors to cash in gainers such as banks and real estate firms. Analysts said the yen's advance against the dollar was also casting a pall over already cautious market sentiment as domestic investors took to the sidelines ahead of the end of Japan's financial year on Wednesday. "Market fundamentals are still solid, but buyers are reluctant to build up new positions ahead of the year-end," said Masatoshi Sato, a senior strategist at Mizuho Investors Securities. "There's growing optimism about Japan's economy but at the same time caution over the market's recent rally, and uncertainties on the currency market and the U.S. economic recovery are discouraging buyers from buying more."
The Nikkei <.N225> fell 0.11 percent to 11,705.51 by 0506 GMT. It earlier rose as high as 11,869.00, its best intraday level since June 4, 2002, as Wall Street's sharp rise overnight lifted both auto makers and tech stocks such as Sony Corp <6758.T>. The broader TOPIX index <.TOPX> was down 0.45 percent at 1,173.81 by mid-afternoon. Banks fell, with industry leader Mizuho Financial Group <8411.T> losing 1.57 percent to 439,000 yen and Mitsubishi Tokyo Financial Group Inc <8306.T> falling 3.81 percent to 1.01 million yen. The banking sector subindex <.IBNKS.T> was down 2.11 percent, making it the biggest losing sector. Investors also sold other recent high-flyers such as real estate firms after rising optimism over Japan's economic recovery boosted the sector in the recent sessions. Some analysts said the market's recent rally has boosted banks, realtors and steel stocks a bit too much and that these stocks were no longer considered bargains. Shares of Mitsui Fodosan Co <8801.T>, Japan's biggest real estate developer, fell 3.63 percent to 1,275 yen. Still, shares are up nearly 32 percent since the start of this year. Among gainers, consumer electronics giant Sony advanced 1.16 percent to 4,370 yen and Fujitsu Ltd <6702.T> added 0.3 percent to 660 yen after earlier hitting a two-month high of 680. Nissan Motor Co <7201.T> was up 0.84 percent at 1,119 yen while Honda Motor <7267.T> picked up 0.21 percent to 4,870 yen.
Japanese data released just before the market opened showed industrial output in February fell 3.7 percent from a month earlier, reflecting the previous month's strong growth and led by declines in electronics and communications equipment. But the decline was in line with expectations, as was the forecast of a rebound in March and April, analysts said.///