Tokyo unable to hang onto early gains

Auto shares rose Thursday on expectations a weaker yen could help exporters such as Honda

TOKYO, Japan - Tokyo shares eased by midday Thursday after a morning jump spurred by gains in major bank shares including Mizuho Holdings.

Mizuho Holdings jumped 4.6 percent to 542,000 yen after hitting 553,000 yen at one point in the morning, while Sumitomo Mitsui Banking rose 4.1 percent to 1044 yen and UFJ Holdings climbed 5.38 percent to 666,000.

The benchmark Nikkei 225 share average fell 31.93 points or 0.3 percent to 10,566.86 after the early spurt put on 2 percent.

The broader TOPIX index lost 3.82 points to 1,083.90.

Elsewhere in the region, Australia's S&P/ASX200 was weaker, finishing the morning off 12.2 points or 0.36 percent at 3276.1

Gold producer Normandy Mining gave up some of the ground it put on Wednesday after a takeover offer from AngloGold.

In Seoul, the Kospi was up 4.11 points or 0.6 percent to 556.02, after the Bank of Korea left interest rates unchanged.

Markets in New Zealand, Taiwan and Hong Kong were also weaker near midday Thursday.

Optimism on possible progress among banks

The optimism in Japan turns on hopes there may be some progress in the banking sector's bad-loan problems, and for Japanese automakers, helped by a weak yen.

Financial Services Minister Hakuo Yanagisawa told International Monetary Fund managing director Horst Koehler in New York meeting on Wednesday that Japan would comply with an IMF program that monitors domestic banking systems.

"The sector had been overshadowed by consistent doubts over Japanese banks' disclosure of their sour loans. So the IMF news is a plus," said Tetsuya Ishijima, chief strategist at Okasan Securities.

Adding momentum to the market were gains in some exporters, cheered by a halt in the recent uptrend in the yen.

A strong yen erodes Japanese exporters' overseas revenues when repatriated into the Japanese currency.

Matushita Electrical was hurt by a media report that it would lose 100 billion yen in the year to next March

Japan's top automaker, Toyota Motor Corp, firmed 1.07 percent to 3,770 yen and third-ranked Honda Motor Co Ltd gained 3.85 percent to 4,590 yen.

But Matsushita Electric Industrial Co Ltd dropped 3.3 percent to 1684 yen after a media report that the world's biggest consumer electronics maker may post a group net loss of 100 billion yen ($827.3 million) for the year to next March.

Reuters contributed to this report.