The Nikkei 225 average fell Tuesday in directionless trading, caught in a tug of war between buying of undervalued issues and selling on a rally.
The key index lost 25.84 points to finish at 13,007.28. On Monday, the Nikkei shot up 346.60 points.
But the Topix climbed 1.68 points to end at 1,086.40 a day after rising 28.27 points.
After opening slightly lower, the Nikkei returned to positive territory and briefly rose more than 100 points thanks to a Wall Street rally overnight.
Stock prices were also supported by buying of undervalued issues after the massive sell-offs last week, as well as purchases of export-oriented names, including carmakers and electronics makers.
After the initial buying ran its course, however, selling on a rally grew as the yen hovered at high levels, and the Nikkei closed the morning session lower.
In the afternoon, the key market gauge moved narrowly around 13,000 in the absence of fresh trading incentives, with investors retreating to the sidelines to wait for the completion of a two-day meeting of the U.S. Federal Reserve’s Federal Open Market Committee, brokers said.
“Market participants found it difficult to step up purchases” before the closely watched FOMC meeting, as moves of the yen and U.S. stock prices depend on the coming FOMC statement and Fed Chairman Ben Bernanke’s comments, said Kenichi Hirano, adviser and market analyst at Tachibana Securities Co.
Also, “selling hit the market before the Nikkei touches its 75-day moving average,” which stood at 13,259.44 as of Monday, Hirano said.
Meanwhile, the market was little affected by the opening-day discussions Monday at the Group of Eight summit in Northern Ireland. But investors were relieved to learn that the G-8 leaders supported Prime Minister Shizo Abe’s economic policy package, brokers said.
Falling issues outpaced rising ones 813 to 775 on the first section, while 123 issues were unchanged. Volume fell to 2.434 billion shares from 2.504 billion Monday.
JGBs turn higher
Japanese government bonds bounced back moderately Tuesday on expectations for purchases by the Bank of Japan on Wednesday.
The lead September contract on 10-year JGBs closed up 0.24 point from Monday at 142.95. Volume grew to 29,440 contracts from 21,184.