Shares of Kirin Brewery Co. Ltd. slid more than 3 percent after Japan's second-largest beer maker raised its half-year profit forecast, yet that still fell short of market expectations.
U.S. technology stocks fell sharply on Monday after brokerage Merrill Lynch cut its rating on the sector. An earnings warning from data-storage-equipment maker EMC Corp. also hurt sentiment.
Investors sold Japanese tech stocks after the decline in U.S.
tech shares, due to increased concern about the outlook for the sector, said Yoku Ihara, a manager of investment information at Retela Crea Securities.
''U.S. techs haven't been faring well ... that is helping to weigh on Japanese technology issues, which are a mainstay of the Tokyo market,'' he said.
The Nikkei finished the morning 140.40 points lower at 15,412.41.
The broader TOPIX index was down 0.90 percent at 1,579.79.
Electronic-components maker TDK declined 2.2 percent to 8,630 yen. Toshiba Corp. dropped 2.8 percent to 738 yen, and chip-gear maker Advantest Corp. gave up 2.2 percent to 11,860 yen.
TECH PROFIT FEARS The profit warning from EMC, following a similar warning from U.S. diversified manu acturer 3M Co. last week, helped raise concern that tech earnings -- in Japan and elsewhere -- may disappoint the market.
''In addition to today's news about EMC ... last Friday there was 3M, which is tech-related. The biggest concern about earnings is in the tech sector, so that is causing their shares to be sold in Japan as well,'' said Soichiro Monji, chief strategist at the equity management department of Daiwa SB Investments.
''In Japan, we're likely to see upward earnings revisions overall, but techs are a little bit of a worry. Especially makers of flat-panel televisions and LCD displays.'' Consumer-electronics giant Sony Corp. fell 1 percent to 5,000 yen, and rival Matsushita Electric Industrial Co. Ltd., the maker of Panasonic-brand goods, declined 2.5 percent to 2,330 yen.
Kirin Brewery dropped 3.5 percent to 1,782 yen. The company raised its half-year profit forecast by 7.5 percent on Monday but that was still below market expectations.
Shinko Securities Co. Ltd. dropped 2.5 percent to 465 yen, and Cosmo Securities fell 2.3 percent to 209 yen after the Nihon Keizai Shimbun said the mid-sized brokerages are cutting their fees on Internet trading, fuelling concerns about shrinking revenues.
The newspaper said the cuts are aimed at competing with Nomura Holdings Inc., which launched an Internet trading business in May.
Trade volume rose with 705 million shares changing hands on the Tokyo exchange's first section. Decliners beat advancers by a ratio of more than two to one.
REUTERS CS RK1125