By Ayai Tomisawa
TOKYO, May 27 (Reuters) - The Nikkei average pared losses to stand almost flat on Friday, after bank shares gained on a report that capital requirements for European banks may be relaxed.
The Financial Times reported that banks in the European Union could avoid part of the tighter Basel III capital requirements under draft legislation implementing the new globally agreed standards across the 27-member bloc. [ID:nLDE74Q00T]
The report boosted Japanese bank shares, with Mitsubishi UFJ Financial Group rising 1.3 percent to 379 yen and Sumitomo Mitsui Financial Group gaining 1.3 percent to 2,373 yen.
"Bank shares may recover to the levels before Edano startled the market two weeks ago," said a trader at a European brokerage.
Chief Cabinet Secretary Yukio Edano said on May 13 he expected financial institutions to be asked to cooperate with helping troubled nuclear operator Tepco fund compensation.
The Nikkei was down 0.2 percent at 9,543.74, having recovered from an early fall to 9,493.44. The broader Topix index was down 0.1 percent at 826.58.
Japanese share prices fell earlier as traders took their cue from a stronger yen and a drop in Sony Corp shares after the electronic giant issued an earnings outlook below analysts' forecasts. (Reporting by Hideyuki Sano; Editing by Michael Watson)