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

By Rocky Swift

TOKYO, July 10 (Reuters) - Japan's Nikkei share gauge slid on Thursday, snapping a two-day advance, as trade frictions and an upcoming election weighed on investor sentiment.

The Nikkei 225 Index .N225 lost 0.6% to 39,646.36, while the broader Topix .TOPX shed 0.6%.

The Nikkei closed above the psychological level of 40,000 on June 27 for the first time since early January, but since then has hovered mostly below that line.

"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."

Retailer Aeon 8267.T plunged 4.9% after postponing its earnings announcement due to the discovery of inappropriate accounting practices at a Vietnamese subsidiary.

Chipmaker supplier Disco 6146.T led gains on the Nikkei with a 4.2% 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 stands out among major U.S. trading partners as still being far from a trade deal despite multiple rounds of talks.

Meanwhile, Japanese policymakers are increasingly focused on a critical upcoming election on July 20. Polls show the government's ruling coalition is in danger of losing its majority in the upper house.

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 60 advancers on the Nikkei index against 163 decliners. The biggest losers by percentage were Nikon 7731.T, down 5.3%, followed by Omron 6645.T, which sank 5.2%.

The biggest percentage gainers were Disco, followed by consulting firm BayCurrent 6532.T, which jumped 3.51%.