Tokyo: Japan's Nikkei stock average fell for a second straight day on Thursday, hurt by the Yen's persistent strength and fears the US might be heading for another recession, with many investors on the sidelines ahead of US economic data.
Chip-related shares underperformed after Dell's disappointing sales outlook fanned worries that weaker economic growth will hurt earnings in the third quarter and sent US tech shares tumbling.
"The biggest problem for investors right now is the strong Yen," said Koichi Ogawa, chief portfolio manager at Daiwa SB Investments.
This week the dollar has traded in a narrow range just above its historical record low of 76.25 Yen. But Tokyo currency traders say the greenback could test that level next week when more market participants return from summer vacation and as many exporters may sell the dollar in month-end transactions.
A strong currency undermines the value of Japanese exporters' overseas profits, and also makes Japanese shares less attractive to investors holding other currencies.
The benchmark Nikkei ended the morning session down 0.4 per cent at 9,019.52, slipping further from one-week intraday high of 9,150.31 hit on Tuesday, while the broader Topix index fell 0.5 per cent to 772.87.
Trade has been thin this week as many domestic market participants are on summer holidays and as foreigners wait for the US data.
US data due on Thursday will help investors gauge the strength of one of Japan's main export targets. Reports include consumer prices, existing home sales and manufacturing data for the mid-Atlantic region.
In the morning session, only 682 million shares changed hands on the Tokyo stock exchange's main board, compared to a daily average of 2.4 billion shares last week.
"Without the active participation of overseas institutional investors, it's difficult for the market to rise," Ogawa said.
Among chipmakers, Advantest fell 3.0 per cent to 1,084 Yen and Tokyo Electron shed 2.3 per cent to 3,620 Yen.
Consumer electronics makers were also weaker, with Toshiba dropping 2.7 per cent to 328 Yen and Hitachi shedding 1.4 per cent to 413 Yen.
But Fast Retailing , operator of the Uniqlo casual clothing chain and a widely held stock among domestic investors, rose 4.0 per cent to 14,960 Yen after Goldman Sachs raised its rating to "buy" from "neutral", citing growing demand in Asia.
Beer maker Asahi Group Holdings gained 2.2 per cent to 1,624 Yen after it said it will buy all shares in New Zealand's Independent Liquor Ltd from its two investment-fund owners for 98 billion Yen ($1.3 billion) next month.
Daiichi Sankyo rose 0.9 per cent to 1,518 Yen after US drug regulators approved a targeted skin cancer drug that it developed with Roche Holding.
Japanese trade data released before the market open showed exports fell 3.3 per cent in July from a year earlier, logging a bigger drop than the previous month as a strong Yen and a slowdown in overseas demand harm Japan's export recovery.
Despite the looming fears about the Yen and overseas demand, a monthly Reuters poll of Japanese business confidence edged up in August and is expected to improve further in the coming months.
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