Japan's Nikkei slips as election, US tariffs weigh; Disco gains

By Rocky Swift

TOKYO, July 10 (Reuters) - Japan's Nikkei share gauge slipped on Thursday, stalling ahead of the key 40,000 level, as trade frictions and an upcoming election weighed on investor sentiment.

The Nikkei 225 Index .N225 lost 0.6% to 39,584.11 after two days of gains. The broader Topix .TOPX shed 0.8%.

Retailer Aeon 8267.T plunged 3.5% after postponing its earnings announcement due to the discovery of inappropriate accounting practices at a Vietnamese subsidiary.

Chip-maker supplier Disco 6146.T led gains with a 4.3% surge after it raised its first-quarter earnings forecast, citing strong demand related to artificial intelligence.

Earlier this week, U.S. President Donald Trump announced 25% tariffs on Japan and other trade partners starting August 1, a date he said was final.

Export-dependent Japan remains an outlier among the U.S.'s key trading partners, with multiple rounds of trade talks failing to produce a breakthrough.

Meanwhile, Japanese policymakers are increasingly focused on a critical upcoming election on July 20.

"The Nikkei has been struggling to move higher ahead of the 40,000 mark," said Wataru Akiyama, a strategist at Nomura Securities.

"The stock market may be taking a wait-and-see attitude given the lack of progress in the Japan-U.S. tariff negotiations and the upper house election."

Japan is seeking talks between its tariff negotiator, Ryosei Akazawa, and U.S. Treasury Secretary Scott Bessent during the latter's visit to Japan for the World Expo next week, the Yomiuri newspaper reported, citing Japanese government sources.

There were 40 advancers on the Nikkei against 180 decliners. The biggest losers by percentage were Nikon 7731.T, down 4.68%, followed by Tokyo Electric 9501.T, which slid 3.9%.

The biggest percentage gainers were Disco, followed by Rakuten Group 4755.T, which rose 4%.