TOKYO (AFX-ASIA) - Share prices closed lower in line with the steep falls on NASDAQ Friday, but were well off their lows near the close on positive comments from the ruling Liberal Democratic Party's Shizuka Kamei, dealers said.
Kamei said the government may compile shortly a package of economic and stockmarket stimulus packages that will include securities and land tax cuts.
"His comments created the view that the government has turned more serious about addressing problems," Chuo Securities Co Ltd equity section manager Koichi Seki said.
Kamei's pledge cheered investor sentiment, especially after the release Feb 9 of the LDP's interim report on stockmarket stabilisation measures which failed to live up to expectations, dealers said.
The Nikkei 225 index closed down 55.90 points at 13,119.59, off a low of 12,950.74.
Volume was an estimated 503 million shares.
The Topix index closed down 10.49 points at 1,237.80 and the weighted Nikkei 300 closed down 1.78 points at 24 .
The Nikkei March futures contract was down 30 points at 13,150 on the Osaka exchange and was at 13,160 on the SGX.
There were 540 rises and 698 declines, with 181 stocks unchanged.
Sentiment was also underpinned by renewed expectations for the implementation of a quantitative monetary policy by the Bank of Japan, after Kamei stated he will urge the BoJ to adopt a quantitative easing policy, dealers said.
Such view was already widespread after U.S. Treasury Secretary Paul O'Neill pointed to the underlying risk of the Japanese economy slipping into a deflationary cycle at the weekend's G7 ministerial meeting in Italy.
"Given the likelihood that market liquidity may see further growth... those stocks which are sensitive to interest rate movements may continue to draw some interest, just judging by the recent movement of the DJIA index," Tokio Marine Asset Management Co Ltd head of research Tatsuhiko Takura said.
News of the failure of Phoenix Resort, operator of a resort facility where the G8 foreign ministers met last July, even bolstered the market, dealers said.
"Some investors took this development as hard evidence of the latest progress in structural reforms since, just until recently, everybody believed this firm would be bailed out," Chuo's Seki said.
Phoenix said in an announcement it had debts totalling $326bn yen.
Despite Phoenix's collapse, other real estate stocks benefited from Kamei's comments, with Mitsubishi Estate rising 2 yen to 1,082, Mitsui Fudosan adding 10 to 1,071 and Heiwa Rea Estate up 2 at 248.
Non-life insurers drew moderate interest on the shift of fund allocation to domestic demand-linked shares from high-techs, dealers said.
Tokio Marine rose 25 to 1,220, with Sumitomo Marine gaining 3 to 682 and Yasuda Fire up 8 at 580.
Smaller-size automakers benefited from ongoing capital inflow from institutional investors who are cashing out of their positions on sector leaders such as Honda and Toyota, dealers said.
Honda fell 30 to 4,480 and Toyota declined 50 to 3,970, while Mazda gained 7 to 325 and Daihatsu added 13 to 694.
Nissan Diesel rallied 15 to 119 on its announcement of plans to spend 30-35 billion yen over the next three years to renovate its main plant.
But, "with local demand falling that much, it is highly questionable whether the new investment will pay off," Shinko Securities Co Ltd analyst Shinji Kitayama said.
"The company may need to boost borrowings from banks once again to finance such large capital spending, which will enlarge its debt problem."
Among the decliners, PC makers were lower in the wake of Friday's profit-warning by Dell Computer Corp, which re-ignited concerns over the earnings trend for global PC and microchip makers, dealers said.
NEC was down 30 at 2,070 yen, while Fujitsu fell 29 to 1,713, with Hitachi shedding 20 to 1,008, Toshiba off 21 at 674 and Mitsubishi Electric down 41 at 700.
West LB Securities' senior analyst Akira Minamikawa, while warning of a further 10-20% fall in their share prices in the coming few months, said some may soon re-emerge as eligible investment targets.
"For instance, NEC has a comparatively stronger capability to counter any expected declines in profitability of the microchip division with its other segments such as optical infrastructure equipment," he said.