TOKYO Japan's Nikkei share average slipped on Tuesday as weak China manufacturing data heightened concerns over global growth, while investors cashed in some of the recent gains after the yen's slide towards 100 to the dollar stalled.
The underlying mood, however, remained positive after Bank of Japan shocked the financial markets on April 4 by promising to inject $1.4 trillion into the world's third-largest economy to revive growth, helping to limit losses on the Nikkei.
The benchmark ended 0.3 percent lower at 13,529.65 after hitting its highest closing level since July 2008 on Monday after the Group of 20 leading economies stopped short of criticising Japan's aggressive monetary expansionary policies, which have significantly weakened the yen.
"Uncertainties over the global economy are making investors reluctant to chase the stocks higher for now," said Shun Maruyama, chief Japan equity strategist at BNP Paribas, referring to weak economic data overseas.
"Many of them are kind of waiting for the fog to clear."
Data showed on Tuesday that growth in China's vast factory sector dipped in April as new export orders shrank. The PMI release adds to the recent run of soft data from China and the United States, signalling that the global economic recovery may have stalled.
The Nikkei China 50 index, which comprises of companies with significant exposure to the world's second largest economy, fell 0.5 percent.
The yen's failure to push to 100 to the dollar gave equity investors the cue to take some profits on the recent stellar gains. The Japanese currency was quoted at 98.76 to the dollar on Tuesday.
Toyota Motor Corp (7203.T), Daikin Industries (6367.T), Ricoh Co Ltd (7752.T), Toshiba Corp (6502.T) and Nissan Motor Co (7201.T) were down between 0.7 and 1.7 percent.
The broader Topix index eased 0.2 percent to 1,143.78 on Tuesday, with 4.35 billion shares changing hands, down from a one-week high of 4.42 billion hit on Monday.
Investors also pocketed gains in shares of financial and real estate companies, which are expected to benefit the most from Japan's reflationary policy.
The real estate sector dropped 3 percent, while the banking sector lost 1.3 percent, with Mitsubishi UFJ Financial Group (8306.T) off 1.5 percent.
Yet, the real estate sector is still up 103 percent since mid-November, when Shinzo Abe, who became prime minister in December, promised bold monetary and fiscal expansionary policies during his election campaign. During the same period, the benchmark Nikkei has rallied 56 percent.
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"Both institutional and retail investors are waiting for weakness to increase their positions," said Yasuo Sakuma, portfolio manager at Bayview Asset Management, adding that he has kept his long positions in real estate companies as well as small-cap stocks.
Steelmaker JFE Holdings Inc (5411.T) climbed as much as 4.2 percent after it reported an 52.21 billion yen in earnings before tax and special items in the year to March, beating the average forecast of 50.15 billion in a poll of 17 analysts by Thomson Reuters I/B/E/S.The stock ended the day 0.5 percent higher.
Oki Electric Industry Co Ltd (6703.T) surged 20.5 percent after the Nikkei newspaper said the telecommunication equipment maker's operating profit for this fiscal year through March is expected at 22 billion yen, which is almost double that of the previous year, due to strong ATM sales in China.
According to Thomson Reuters I/B/E/S, Japanese companies' one-month earnings momentum -- analysts' earnings upgrades minus downgrades as a total of estimates -- improved to 9.7 percent this month from 8.7 percent in March. It was minus 7.2 percent in December.
(Additional reporting by Tomo Uetake; Editing by Shri Navaratnam)