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Japan stocks weaken as investors weigh chances of stagflation in United States. MOREINFO: Stock investors wade back into market after several days of losses. The dollar was among the star performers of the day, nearing 7-week highs against the euro on expectations the U.S. Federal Reserve may ease back on interest rate cuts due to rising inflation concerns. SCRIPT: Inflation worries put a damper on stocks on Tuesday, although investors began to wade back into the market after several days of weakness. Earlier indications of rising U.S. inflation combined with a slowing economy had ignited fears of stagflation. Japan's Nikkei closed 0.3 percent lower (15,208), it's fifth straight day of losses. Exporters such as Matshushita were badly hit as investors worried U.S. consumers would take to the sidelines due to a slowing economy. Financial stocks took a bruising early in the day but recovered in late trade with global bank HSBC rebounding in Hong Kong. Korean stocks also regained footing toward the end of the session, with investors buying household names such as LG. Philips. The firm announced it would buy Taiwan LCD maker HannStar Display to help ease an expected flat panel shortage in the coming year. The U.S. dollar was a strong performer...nearing a 7 week high against the euro. Investors took the view that inflation risks may limit the extent to which the U.S. Federal Reserve will cut interest rates. Tara Joseph-Hui reporting for Reuters.