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Tokyo - Japan's Nikkei average held on to the previous day's solid gains on Thursday and briefly hit its highest since the post-quake sell-off, helped by year-end window dressing, while strong US data bolstered the global outlook and a weaker yen boosted exporters.
But the benchmark struggled to move decisively higher, as foreign investors were reluctant to buy shares they viewed as too expensive with the market slowly approaching key technical resistance.
Shares of Tokyo Electric Power Co (Tepco), the owner of the quake-stricken nuclear plant, bounced back 8.6%, lifting stocks related to the utility such as shareholders Dai-ichi Life Insurance and Sumitomo Mitsui Financial Group by more than 1% each.
Traders said Tepco's shares were mostly bought by speculators and short-term investors, with some citing funds trading in oil and Chinese funds.
Foreign investors sold ¥13.3bn of Japanese stocks last week after record net buying of ¥893.2bn the week before, government data showed on Thursday.
"March 31 means everything for institutional investors. They're begging to push prices higher even by one yen," said Masayoshi Okamoto, head of dealing at Jujiya Securities, attributing gains in the market to year-end window dressing.
"From tomorrow on everyone is going to think about March 2012 and trading will begin anew with that date in mind. But for now, even the smallest gains will seem huge for players who lost so much in the post-quake sell-off."
By midday the benchmark Nikkei average was almost flat, down 2.88 points at 9 705.91. The broader Topix was also little changed, at 865.94.
Investors bought back underweight shares of banks, which are among the hardest-hit since Japan's March 11 disaster. Tokyo's subindex of banking stocks has lost 11.3% since the quake.
Thomson Reuters data shows banking shares trade at a price-to-book ratio of 0.7, below 1.1 for the Nikkei index.
Major banks, some of which are major lenders to Tepco, have been aggressively sold off on mounting worries over the utility's debt of around $91bn.
Out of steam
"The Nikkei ran out of steam as active buying seen in the futures market, possibly by public funds, slowed down," Takashi Ohba, senior strategist at Okasan Securities.
Market players said foreigners stepped aside when the market slowly closed in on the Nikkei's 200-moving day average at 9 820.
"The market is still cautious about the outlook due to concerns about the fate of the nuclear plant. Uncertainty over the power shortage and worries over falling consumption also should weigh on shares," added Ohba.
The dollar rose to around ¥83.19 on Wednesday, a level last seen on March 11, when it initially fell after Japan's earthquake. It retreated to around ¥82.81 on Thursday.
Japanese shares have shed 7% since the March 11 earthquake, tsunami and nuclear safety crisis erupted, triggered the biggest two-day rout in the market since 1987. In contrast, the MSCI index of Asian shares outside Japan has gained 5%.
Shares in Nissan Motor climbed 1%, roughly in line with other blue-chip exporters, after the automaker denied a media report that CEO Carlos Ghosn said it and Renault SA plan to form a single company.
"There are currently no plans to form a single holding company for both Renault and Nissan," Nissan said in a statement.
Dainippon Sumitomo Pharma Co surged 5.2% to ¥768 in active trade after the firm said it had signed a ¥10bn licensing deal that gives Takeda Pharmaceutical Co exclusive marketing rights to its antipsychotic drug in most of Europe. Dainippon said it will book this one-time payment as sales and profit for the current fiscal year.
