RTRS: Nikkei up but gains capped by yen, profit-taking
Honda Motor Co (7267.T: Quote, Profile, Research, Stock Buzz) and other blue-chip exporters gained on expectations that proposals by U.S. President-elect Barack Obama and other nations could help limit the worsening of the global economy, but investors moved to lock in profits on domestic demand shares that had shot up on Monday, such as Fast Retailing (9983.T: Quote, Profile, Research, Stock Buzz) and Aeon Corp (8267.T: Quote, Profile, Research, Stock Buzz).
Market players said wariness remained about how long shares could rise given overall economic conditions.
"Wall Street shares rose on expectations, but things haven't gotten any better. In fact, the indicators are so bad they could hardly be worse," said Yutaka Miura, senior technical analyst at Shinko Securities.
"Certainly we do have economic policies, but we still don't know exactly what this will result in, and the situation of the U.S. carmakers has yet to be resolved. This uncertainty is hitting the dollar and then stocks."
The benchmark Nikkei .N225 gained 31.50 points to 8,360.55 after earlier rising to 8,499.60, its highest level in more than a week. The broader Topix .TOPX rose 0.4 percent to 815.27.
U.S. stocks rallied to their highest level in a month on Monday on optimism that Obama's proposed infrastructure spending could limit the depth of the recession and on hopes for the bailout of automakers GM (GM.N: Quote, Profile, Research, Stock Buzz), Ford (F.N: Quote, Profile, Research, Stock Buzz) and Chrysler CBS.UL.
Obama has started by asking his economic team to come up with a plan to create at least 2.5 million new jobs by 2011. Congress is also expected to pass a hefty new economic stimulus bill in January that could be ready for Obama's signature immediately after he is sworn in.
Meanwhile, the White House reviewed a Democratic plan on Monday to bail out stricken automakers with up to $15 billion in loans, a move that would also clear the way for longer-term help if industry meets certain conditions.
The U.S. rally was powered by construction machinery companies, with Caterpillar (CAT.N: Quote, Profile, Research, Stock Buzz) surging almost 11 percent on expectations of the infrastructure spending.
Japanese machinery shares, strong on Monday, extended their rise for the same reason, although most had pared gains by midafternoon.
Komatsu climbed 4.1 percent to 1,048 yen and Kubota (6326.T: Quote, Profile, Research, Stock Buzz) rose 6.9 percent to 557 yen. Hitachi Construction (6305.T: Quote, Profile, Research, Stock Buzz) climbed 3.8 percent to 1,000 yen.
Honda rose 5.1 percent to 1,825 yen, becoming the second-largest contributor to the Nikkei 225 by volume weight. Toyota Motor Co (7203.T: Quote, Profile, Research, Stock Buzz), though, edged up a mere 0.6 percent to 2,745 yen.
Shares of Mitsubishi UFJ Financial Group (8306.T: Quote, Profile, Research, Stock Buzz) gained 6.1 percent to 456 yen after Japan's largest bank said its planned capital raising will bring in about $8.6 billion, replenishing funds after losses on its equity portfolio and an investment in Morgan Stanley (MS.N: Quote, Profile, Research, Stock Buzz).
But Fast Retailing slipped 2 percent to 12,560 yen and fellow retailer Aeon was down 1.7 percent at 864 yen.
