Japan's Nikkei average was flat today as investors snatched up banks such as Mizuho Financial Group and other domestic-demand reliant shares, while exporters weakened on a firm yen.
The property sector was also boosted by rating upgrades by Deutsche Securities on real estate investment trust (REIT) firms Nippon Building Fund, Nomura Real Estate Office Fund and Japan Real Estate Investment Corp.
Market participants said Japan's new prime minister's choice of cabinet members was neutral to the market as most of the ministers were holdovers from the previous cabinet.
"Financials rose as they look cheap, and also as investors move towards domestic-dependent stocks amid a harsh currency situation," said Hiroaki Kuramochi, managing director at Bear Stearns (Japan) Ltd, referring to the strong yen.
He also said worries about subprime fallout are receding and investors may be expecting a new flow of money into the sector.
"But I still wouldn't say a market sentiment has improved in the United States or in Japan. The impact of the subprime problem on the real economy is still unclear."
The benchmark Nikkei ended the morning session down 0.01 per cent or 1.77 points at 16,399.96, while the broader TOPIX index added 0.22 per cent or 3.45 points to 1,570.28.
The US currency was little changed at 114.80 yen, pulling away from the day's low around 114.50 yen.
Investors picked up machinery issues such as Mitsubishi Heavy Industries Ltd on expectations for strong demand from emerging countries, said Tsuyoshi Segawa, equity strategist at Shinko Securities.
Segawa said the Nikkei's next target level after recovering recent losses will be around 16,800, and for that, the market needs more trading factors.
Trade volume was moderate with 877 million shares changing hands on the Tokyo exchange's first section, compared with last week's morning average of 832 million.
Advancing shares beat decliners 993 to 607.