Tokyo stocks ease after early gains

Shares in Sony were down for the seventh straight session on Tuesday

TOKYO, Japan -- Tokyo stocks were softer by midday Tuesday after a modest morning recovery ran out of steam.

Investor jitters over corporate earnings outweighed the upturn for technology issues such as Fujitsu.

The benchmark Nikkei 225 average was down 19.64 points to 12,216.08 in early afternoon trading, while the broader TOPIX index was virtually unchanged, down 0.17 points to 1,237.73.

Other markets in the region were mixed. Australia and New Zealand stayed positive, but Korea and Taiwan were unable to hang onto morning gains and drifted into negative territory by midday.

Singapore's Straits Times Index was 13 points higher at 1667.84, despite government figures showing the economy contracted in the June quarter.

Initial gains from Wall Street's performance

Asian markets initially had gained from Wall Street's more positive performance Monday. The Dow Jones Industrial Average gained 46.72 points to 10,299.40, while the Nasdaq was up 22.55 points to 2026.71.

"A bounce for the Nasdaq helps, but one day in the plus column doesn't do much to alleviate strong fears in the market that high-tech earnings are hurting," said Tatsuyuki Kawasaki, director of equities at Kaneyama Securities in Tokyo.

Reflecting those concerns, consumer electronics giant Sony Corp extended losses into a seventh session, dropping 0.7 percent to 7,100 yen. It traded at levels last seen in September 1999.

Buyers have shied away from Sony amid worries that it and many of Japan's electronics companies will cut their profit forecasts for the business year to next March when they report quarterly earnings.

Government may look at extra budget

Japan's Economics Minister Heizo Takenaka said Tuesday that the government would watch data from summer to autumn to consider whether an extra budget was needed.

He said recent indicators showed that economic conditions were worsening, adding that a contraction would put the economy under risks of entering a deflationary spiral.

Independent software developer Fuji Soft ABC slid 12.25 percent to 5,230, after lopping off more than 13 percent on Monday when investors booed news that Daiei Information Systems Co (DIS), a unit of ailing retailer Daiei Inc, would issue 29,714 new shares at 50,000 yen each and allocate them to Fuji Soft.

The deal, giving Fuji Soft a 65 percent stake in DIS, would mean that it would assume debts owed by DIS in proportion to that stake.

Fujitsu, Toshiba and some other major tech issues took their cue from a 1.13 percent uptick in the U.S. Nasdaq, which snapped the tech-laden index's four-session losing streak.

PC and chipmaker Fujitsu rose 2.07 percent to 1,184 yen, while top semiconductor manufacturer Toshiba added 1.87 percent to 600 yen.

Reuters contributed to this report.