Japanese stocks fall as nuclear worries sap appetite

* Rebound from steep falls runs out of steam

* Radiation concerns keep investors on edge

* Small cap builders benefit from reconstruction
expectations

(Updates throughout)

By Hideyuki Sano

TOKYO, March 24 (Reuters) – Japanese shares slipped on
Thursday, with short-covering after a steep fall last week
running out of steam as nerve-racking radiation leaks from a
quake-stricken nuclear plant impeded any optimism on the
economy.

While the near-term market outlook is seen depending on
whether Japan can safely stabilise the crippled plant, in the
longer run, the market could fall under the weight of the damage
from a massive earthquake this month and likely power shortages.

“The damage from the earthquake and the power plant saga
have only begun to unfold now. The market is likely to test the
downside in the next six months,” said Daisuke Uno, chief
strategist at Sumitomo Mitsui Banking Corp.

“The lows hit right after the earthquakes — around 8,200 in
the Nikkei and 7,800 in Nikkei futures — would be a good
target,” Uno added.

The benchmark Nikkei average fell 0.2 percent to
9,430.50, failing to track 0.7 percent gains in Asian shares and
a small rise in Wall Street stocks on Wednesday.

Earlier in the week, the Nikkei briefly rose above 9,559.62,
a 50 percent retracement of its fall from a February 17 peak to
a two-year intraday low hit last week, but many market players
saw little reason to push Nikkei beyond that level.

“The market has risen only because it was oversold last
week, not because of any improvements in market factors. It’s
just in line with market theory,” said Takashi Hiroki, chief
strategist at Monex Securities.

“We are unlikely to see further gains in the near future,
unless there’s an end to the nuclear crisis in sight.”

One trader said foreign players were selling a basket of
stocks.

Nearly two weeks after the earthquake and tsunami that
battered the Fukushima nuclear complex and devastated northeast
Japan, Japan is grappling with threats from radiation leaks as
Tokyo’s 13 million people were told not to give infants tap
water.

“The impact of the quake has already been priced in, but the
extent to which power cuts will affect companies is completely
unpredictable and may be prolonged, weighing heavily on the
whole market,” said Makoto Kikuchi, CEO at Myojo Asset
Management Japan.

The broader Topix index fell 0.6 percent to 855.99
with its 200-day moving average at 871.36 seen as major
resistance.

Small cap construction companies continued to benefit from
expectations of reconstruction demand, while automakers such as
Toyota suffered from worries about disruption in their
supply chains.

But traders also said buying in construction firms looks to
be increasingly driven by short-term speculators.

(Additional reporting by Antoni Slodkowski; Editing by Joseph
Radford)

Japanese stocks fall as nuclear worries sap appetite