By Ayai Tomisawa
TOKYO, May 15 (Reuters) - Japanese stocks pulled back from 3-1-/2-month highs on Tuesday morning, though bank shares staged a rally on hopes of strong earnings for the sector.
The Nikkei share average .N225 eased 0.1 percent to 22,845.67 in midmorning trade, after closing at the highest level since Feb. 2 on Monday. Earlier on Tuesday, it flirted with positive territory.
The broader Topix .TOPX added 0.1 percent to 1,808.05.
The banking sector .IBNKS.T jumped 1.4 percent and was the best sectoral performer, with Mitsui Sumitomo Financial Group 8316.T rallying more than 3 percent after it reported a 3.9 percent rise in annual net profit helped by lower bad loan costs and gains from equity holdings. also said it will buy back up to 1.4 percent of its own shares worth 70 bln yen. UFJ Financial Group 8306.T and Mizuho Financial Group 8411.T , which will report their earnings after the market close, rose 1.4 percent and 1.3 percent, respectively.
Traders said that with the Nikkei reaching resistance of 23,000, profit-taking may accelerate especially in the face of geopolitical tensions in the Middle East with the high-profile opening of the U.S. embassy to Israel in Jerusalem. companies' earnings were almost over and the market has mostly priced in the results. Investors may take profits from the recent rises in stocks as there are potential selling catalysts globally," said Hikaru Sato, a senior technical analyst at Daiwa Securities.
Tuesday's losers include real estate companies, with Mitsubishi Estate 8802.T stumbling more than 4 percent and Mitsui Fudosan 8801.T falling 1.9 percent.
Meanwhile, MSCI changed constituents for its indexes on Monday. For the MSCI Japan Index, it added CyberAgent 4751.T , Kobayashi Pharmaceutical Co 4967.T , SG Holdings Co 9143.T and Tokyo Centry Corp 8439.T . A mixed reaction followed the news, with CyberAgent declining 1.8 percent, Kobayashi falling 3.6 percent, SG Holdings rising 2.4 percent and Tokyo Century dropping 2.2 percent.
MSCI deleted Hachijuni Bank 8359.T , Kyushu Financial Group 7180.T and Mixi Inc 2121.T . (Editing by Shri Navaratnam)