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Japanese shares fell on Tuesday, led by index heavyweights Fanuc and Honda Motor on weak earnings guidance, but they still turned in their best April performance in 20 years on the back of sweeping stimulus measures unveiled earlier in the month.
The benchmark Nikkei slipped 0.2% to 13,860.86, after popping up into positive territory several times in the afternoon.
On the month, the index was up 11.8% and marked its best April performance since 1993, largely driven by the Bank of Japan's plans to inject $1.4 trillion into the economy in less than two years to revive growth.
"Investors have been focused on corporate earnings. Of course earnings are a mixed bag, so far the results appear to be largely within the market's expectations," said Masayuki Otani, chief market analyst at Securities Japan.
"Today, the overall market is quite solid except some heavyweights, which dragged down the Nikkei."
Fanuc Corpslumped 5.6% after the industrial robot maker forecast a first-half operating profit of 62 billion yen, well below a full-year forecast of 175.4 billion yen in a Thomson Reuters I/B/E/S. It was the top-weighted loser in the Nikkei, contributing 35 negative points to the index.
Honda Motor Co lost 3.4% after the automaker's annual operating profit estimate also came in below market consensus. It was the second-weighted loser in the Nikkei, contributing 11 negative points to the index. It was also the most traded stock on the main board by turnover.
The broader Topix index gained 0.3% to 1,165.13 on Tuesday, with 3.40 billion shares changing hands, the lowest in four weeks.
Nomura Holdings Inc climbed 4.1% after Japan's largest brokerage reported its highest quarterly profit in seven years as it cashed in on the surge in domestic shares and booked a one-off gain on the sale of a property affiliate's stocks.
Rival Daiwa Securities Group Inc rose 5%, while the securities sector gained 4.6% to become the best sectoral performer on the board.
Daiwa Securities carries a 12-month forward price-to-earnings ratio of 17.7, below Nomura's 18.6 and the sector's average of 19.2, according to Thomson Reuters Datastream.
EARNINGS SEASON CONTINUES
"One of the biggest takeaways for the exporters in this earnings season is the conservative FX assumptions they have taken in their guidance for 2013," said Stefan Worrall, director of equity sales at Credit Suisse in Tokyo.
"That's probably a bit disappointing. What this underscores is that the BOJ and policymakers still have their work cut out for them to try to convince corporate Japan that the weaker yen is sustainable," he added.
Expectations that Japanese firms would sharply lift their earnings forecasts for the fiscal year ending March 2014 had been high after the yen weakened 20% since mid-November, when Shinzo Abe, who became prime minister in December, promised expansionary monetary and fiscal policies to boost the economy.
During the same period, the Nikkei has jumped 60%.
The yen hovered near its highest level in roughly two weeks against the dollar on Tuesday as declining U.S. bond yields and slowing inflation put pressure on the Federal Reserve for more action.
The Japanese currency rose to as high as 97.35 yen on Monday, its highest level in almost two weeks. It last traded at 97.74 yen.
But some analysts say the impact of yen weakness on certain exporters could be less than expected.
"In the last five years ... Japanese exporters have been actively trying to diversify their production, reducing their sensitivity to yen strength," a trader said.
"In the opposite way, it reduces the benefit to them from the yen weakness," he added.
Of the 39 Nikkei companies that have reported quarterly results, 56% of them came in below market expectations, according to Thomson Reuters StarMine. That compared with 62% in the previous quarter.
