Japan's Nikkei average reversed morning gains to fall to a three-month intraday low late Friday afternoon as investors dumped banks and real estate firms amid growing concerns about the strength of Japan's economy. Record high oil prices, a possible interest rate rise in the United States, Japan's biggest trade partner, and Thursday's weak machinery orders data at home are casting a shadow over Japan's recovery and weighing on the Tokyo market, analysts said. The Nikkei average <.N225> was poised to hit a new three-month closing low as it was down 0.47 percent at 10,774.54 as of 0520 GMT, adding to the previous day's 2.95 percent fall.
The Nikkei earlier rose as high as 10,939.09 before initial buying in reaction to Thursday's steep fall faded. The broader TOPIX index <.TOPX> was down 0.85 percent at 1,086.65. The Nikkei dropped below the previous three-month intraday low of 10,790.13 marked this week, prompting more selling in the domestic sector, which had led the market higher until late April when the Nikkei hit 33-month peaks, analysts said. Investors shrugged off media reports that Prime Minister Junichiro Koizumi would go to North Korea next week for talks on the families of Japanese citizens kidnapped decades ago by Pyongyang to train spies. A breakthrough in the dispute over the abductees, an emotive topic in Japan, would clear the way for talks on establishing diplomatic ties between the two countries and be a political coup for Koizumi ahead of a July Upper House election. But analysts said the reported visit would have much less impact on domestic politics than an epoch-making summit between Koizumi and North Korean leader Kim Jong-il in September 2002. "The surprise visit (then) was a plus for the stock market. But this time it's not having that much impact," said Yusuke Sakai, manager of equities at Mizuho Securities.
Mizuho Financial Group <8411.T>, Japan's biggest bank by assets and the most active issue by value, wiped off morning gains and was down 3.08 percent at 440,000 yen. Its rival Sumitomo Mitsui Financial Group <8316.T> was down 1.65 percent at 717,000 yen. Property developer Mitsubishi Estate Co <8802.T> lost 1.37 percent even though its annual earnings beat analyst expectations. Mitsubishi, Japan's most valuable property developer, on Thursday reported an eight percent rise in operating profit for the past year and projected further growth on improving rental income as Tokyo's real-estate market recovers. Steel makers came under pressure after a newspaper report that industry data showed inventories of H-shaped steel products, used mainly for construction, increased in April in Japan for the first time in five months. Electric furnace steel maker Tokyo Steel Manufacturing Co <5423.T> lost 10.35 percent to 1,455 yen and peer Godo Steel Ltd <5410.T> plunged 13.24 percent to 308 yen. Minebea Co <6479.T> tumbled 6.31 percent to 460 yen, after the miniature-bearing manufacturer's profit forecast failed to satisfy investors. Analysts said technical charts show that the Nikkei is firmly supported by its 200-day moving average, which now stands at around 10,720. But investors are seen cautious about buying before the release of U.S. consumer price and industrial production data later on Friday, which could give clues on when and by how much the U.S. Federal Reserve may raise rates. "Investors are nervous about a U.S. rate hike, about when and by how much the Fed will raise...and a spike in oil prices is making the guessing even more difficult," said Yasuo Ueki, a market analyst at consultancy Poko Financial Office.///www.reuters.com