Tokyo shares slipped in thin trade on Tuesday as investors watchful of currency moves sold Toyota Motor Corp and other exporters on a stronger yen, and banks and brokerage firms fell after their U.S. peers slipped the previous session.
But a firmer yen supported Nippon Paper Group and others that have been under pressure from higher imported material costs. Nippon Yusen KK and two other major shipping stocks sailed higher after Standard & Poor's raised its long-term corporate and senior unsecured debt ratings on them.
The yen rose broadly on Tuesday as investors trimmed risky assets after weak U.S. housing data further stoked worries about rocky credit markets.
With that trend, investors appear to be changing their focus.
Investor focus has now shifted to those likely to benefit from the strong yen, said Yoshihisa Okamoto, senior vice president at Fuji Investment Management.
He cited Nitori Co Ltd, a furniture store operator that sells imported goods, as one such stock. Shares of Nitori have climbed 1.8 percent this month, outperforming the TOPIX index, which has logged a 7.2 percent drop.
The focus is also on whether the strong yen can ease the burden of higher material costs, Okamoto added.
The benchmark Nikkei average lost 13.90 points or 0.09 percent to 16,287.49, while the broad TOPIX index fell 0.2 percent to 1,584.60.
But many shied away from the market ahead of U.S. economic indicators including a preliminary report on second-quarter GDP, keeping the volume low.
On Tuesday, trade was thin with 1.3 billion shares changing hands on the Tokyo exchange's first section, the lowest volume since December 25. Declining stocks outnumbered advancing ones by 941 to 654.
Toyota gave up 0.6 percent to end at 6,660 yen and Advantest Corp, the world's largest maker of microchip testers, shed 1 percent to 4,150 yen, falling victim to the firmer yen.
But Nippon Paper added 1.8 percent to 391,000 yen and its rival Oji Paper Co. gained 2.1 percent to 573 yen.
Financial stocks were lower after Goldman Sachs slashed its earnings forecast on Lehman Brothers Holdings, Bear Stearns Cos Inc and Morgan Stanley, saying August was one of the worst operating environments for investment banks it had seen in years.
Brokerage group Nomura Holdings lost 1 percent to 2,020 yen and Mizuho Financial Group In, Japan's second-largest banking group, fell 0.8 percent to 714,000 yen.