Nikkei down, exporters drag as yen weakness pauses

Tue Jan 8, 2013 3:08am GMT

* Nikkei, Topix down 0.5 pct
    * Nikkei may recover 10,600 if dollar/yen rises above
88-strategist
    * Mothers market strong, small-to-mid size shares up
    * Market cautious before earnings season -trader
    * Sharp rises, sees better-than-expected quarterly results

    By Ayai Tomisawa
    TOKYO, Jan 8 (Reuters) - Japan's Nikkei fell on Tuesday as
investors turned cautious over the index's recent rapid gains
and sold shares in exporters as the yen's depreciation paused,
but falls were limited as ongoing optimism over future policy
easing supported sentiment.
    The Nikkei dropped 0.5 percent to 10,548.56 by the
midday break.
    Analysts said that investors took profits on some exporters'
recent gains now that the weakening trend of the yen appears to
have paused for the time being.
    The dollar traded at 87.60 yen, retreating from a 2-1/2-year
high of 88.48 yen marked on Friday as robust appreciation over
the past month had investors opting to book profits despite
expectations of further Bank of Japan stimulus later in the
month.
    "If the yen drops to 88 to the dollar, the Nikkei will
likely recover the 10,600-line and even rise further," said
Kenichi Hirano, a strategist at Tachibana Securities, adding
that the market has stayed sensitive to daytime currency moves.
    Toyota Motor Corp shed 1.1 percent, Nissan Motor Co
 dropped 0.8 percent and Fanuc Ltd weakened 1.5
percent.
    On the other hand, small-to-mid size companies attracted
buying as retail investors have come back to the market, said
Hiroichi Nishi, general manager at SMBC Nikko Securities.
    The Mothers Exchange, which lists small-to-mid size
companies, was up 0.8 percent after hitting the highest level
since Sept. 2011 on Monday.
    
    CAUTIOUS MOOD BEFORE 3Q EARNINGS
    As the majority of companies start releasing their earnings
for the Oct-Dec period mid to late this month, investors are
growing cautious amid anticipation of sluggish growth in
corporate profits, traders said.
    "Some stocks that have been rising won't see justifications
to rise further such as industrial machinery makers and some
autos as their third-quarter earnings are seen weak," said a
trader at a foreign brokerage. "Broadly, people remain bullish
but the market won't probably rise in a straight line."
    But he added that with expectations the central bank will
come up with further stimulus measures, drops may be limited
despite possible further corrections in the market.
    New Prime Minister Shinzo Abe, whose Liberal Democratic
Party (LDP) surged to power in December's lower house election,
has called on the central bank to take bolder monetary stimulus 
measures to beat deflation, and possibly hold it accountable not
just for pushing up prices but also boosting job growth.
    A final decision will be made at the Bank Of Japan's next
rate review on Jan. 21-22, when it will debate setting a higher
inflation target than the current 1 percent goal.
    The Nikkei has risen about 22 percent since mid-November 
when Abe started calling for aggressive easing, taking the index
deeper into overbought territory. 
    Its 14-day relative strength index is at 75.22, above 70 
which is considered overbought and often indicates an imminent 
adjustment.
    Sharp Corp bucked the overall market weakness and
climbed 5.0 percent after the struggling TV maker said it had a
better-than-expected operating profit for October-December, as
it scrambles to generate profits in hopes of securing fresh
financing. 
    The broader Topix shed 0.5 percent to 877.04 in
active trade, with 1.86 billion shares changing hands.
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