Japan's shares held steady on Friday, halting recent rally, as disappointing corporate earnings from NEC Corp and Nintendo Co Ltd countered signals of improving US economic growth.
Nintendo shed as much as 7.8% to hit an eight-year low after the game company posted a sharp drop in quarterly profit and forecast a bigger-than-expected annual loss as it battles a strong yen and its game devices loss ground to gadgets such as Apple's iPhone.
NEC Corp sank 6.6% after the high-tech and communication systems manufacturer warned on Thursday it would post a net loss of 100 billion yen for the year ending March, compared with its previous forecast of a 15 billion yen profit.
Japan's corporate earnings results have been disappointing so far, although it is still early in the reporting season.
Out of the 13 Nikkei companies that have reported quarterly figures so far, nearly 70% of them came in below market expectations, Thomson Reuters StarMine data showed. That compares with 35% of the S&P 500 companies.
The Nikkei was flat at 8,847.75, while the broader Topix eased 0.1% to 763.70 .
"You can argue that the market is a little bit too stripped, the earnings are quite soft, the yen is coming back a bit, the euro is not carrying on the bullishness we thought previously," said Stefan Worrall, director of equity at Credit Suisse in Tokyo.
"There are the reasons to take profit but at the same time there has been a clear loosening of US monetary policy it seems in the context of those (Fed) forecasts, we continue to see underweight long only positions being normalised, which provides some buying pressure."
Worrall added the market remained relatively bullish and that earnings were backward looking indicators.
According to Thomson Reuters I/B/E/S, the pace of deterioration of Topix's earnings momentum -- analysts' upgrades minus downgrades as a precentage of total estimates -- moderated to minus 4.8% from December's minus 8.1%, signalling a less gloomy outlook for corporate earnings.
The benchmark Nikkei is up 4.6% this month, and if the index were to finish with the current gains, it would be the best January performance since 1999.
Morgan Stanley MUFG analysts said, however, they preferred Asian shares excluding Japan to Japanese equities, though their year end target for the Topix at 850 was still 11.3% upside from the current level.
Shares in Elpida Memory shed 6.3% after the Nikkei business daily said the memory chip maker is likely to book an operating loss of around 90 billion yen for the April-December period.
But Komatsu advanced 1.8% after US peer Caterpillar reported a 58% rise in quarterly earnings on record sales of construction and mining equipment, and forecast strong growth for this year.
