Tokyo: The Nikkei benchmark edged higher on Monday but most investors were on the sidelines after Federal Reserve Chairman Ben Bernanke failed to provide a clear direction on the potential for US monetary easing and ahead of an election to choose Japan's next prime minister.
Aozora Bank jumped 6 per cent after the Australian Financial Review said that the Australia and New Zealand Banking Group is looking at buying either Aozora or Tokyo Star Bank.
The results of the first round of the vote to pick the leader of Japan's ruling party and hence the next Prime Minister, the country's sixth in five years, will be announced around 1:10 pm (0410 GMT).
"The impact of the election may be limited as Japanese political matters tend to be less important to the market than other external factors such as US economic indicators, but since it's a major political event for the country, players may want to see the outcome before taking large positions," said Kazuhiro Takahashi, general manager at Daiwa Securities.
"US jobs data is going to be much more important for setting the tone in the market, so people are looking at it for mid-term investment decisions."
US jobs data will be released on Friday.
The benchmark Nikkei rose 0.5 per cent to 8,845.19 by the midday break, while the broader Topix index climbed 0.5 per cent to 759.45.
Volume was thin, with 795 million shares changing hands on the Tokyo stock market first section, and the day's volume looked set to come in below last week's average of 2.06 billion shares.
"The market may stay directionless this week as Bernanke has not given a clear indication of what the Fed will do to counter economic worries," said Tsuyoshi Kawata, a senior strategist at SMBC Nikko Securities.
Bernanke said the Fed had marked down its outlook for US economic growth and announced it would extend its September policy meeting to two days to consider its options.
But he said the onus for boosting long-term growth prospects lay at the feet of the White House and the US Congress.
Currency movements will also be in focus as the dollar remains below 77 yen, pressuring exporters.
Five lawmakers, including fiscal conservative Finance Minister Yoshihiko Noda, Trade Minister Banri Kaieda and former foreign minister Seiji Maehara, registered on Saturday to run in the party vote. The winner will become prime minister by virtue of the Democratic Party's majority in parliament's lower house.
Shippers were higher, with Mitsui OSK rising 3.2 per cent to 327 yen and Nippon Yusen gaining 2.7 per cent to 229 yen after Nomura Securities restarted coverage of the sector at "bullish" and restarted the two companies with a "buy" rating, saying tight demand in iron ore and coal will likely lift their prices in the coming years.
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