Nikkei hits 32-month high, but minister's comments on yen pare gains

Tue Jan 15, 2013 7:16am GMT

* Nikkei rises 0.7 pct, Topix up 0.8 pct
    * Amari's comment triggers profit-taking
    * Sharp down 2.7 pct due to report of Apple cuts
    * Exporters, growth-sensitive stocks strong

    By Ayai Tomisawa
    TOKYO, Jan 15 (Reuters) - Japan's Nikkei share average
closed at a 32-month high, as persistent weakness in the yen
boosted demand for exporters' shares, though comments on the
currency by the economic minister trimmed Tuesday's gains.
    The Nikkei rose 0.7 percent to 10,879.08, the
highest close since April 30, 2010.
    It rose to as high as 10,952.31 in early trade, before
paring gains after Japanese Economics Minister Akira Amari said
that excessive yen weakness could have a negative impact on the
country.
    The Nikkei has rallied about 26 percent over the past two
months, spurred by the weakness in the yen after Japan's new
leader Shinzo Abe called on the Bank of Japan to adopt
aggressive policies to energise the ailing economy, including
setting an annual inflation target of 2 percent.
    Tuesday's rally took the benchmark Nikkei's 14-day relative
strength index to 79.6, way above the 70-mark which is deemed
overbought and often signals a near-term correction.
    Analysts said that as some technical signs show the market
is overheated, it is becoming increasingly sensitive to news
flows and lawmakers' remarks, which could trigger a correction
or profit-taking.
    "The economic minister's comments soured the mood," said
Masatoshi Sato, senior strategist at the investment information
department at Mizuho Securities.
    Amari said at a news conference that the yen's exchange
rates have now been adjusted autonomously after a spell of
appreciation, reflecting the current economic conditions in
Japan.
    But he also said that the excessive yen weakness will lead
to a rise in the prices of imported goods, adversely affecting
people's lives. He did not comment on what he considered a
comfortable yen level.
    The dollar dropped about 0.6 percent to 89.95 yen on
the day. At one point, it fell as low as 88.62 yen.
    Mizuho's Sato said that although the market is prone to
short-term profit-taking triggered by news flows in the coming
days, investor sentiment remains positive before the central
bank's policy meeting on Jan. 21-22.
    "There is a fear to sell now," Sato said, adding that
exporters may stay strong on expectations the Bank of Japan will
be forced to take bold action to jump-start the sluggish
economy.
    A weak yen lifts exporters' overseas earnings when these are
repatriated.
    
    REFLATIONARY SECTORS ATTRACT BUYING
    Exporters led the index higher on Tuesday, including Suzuki
Motor Corp, Panasonic, Daikin Industries Ltd
, and Olympus Corp, which were up between 2.7
percent and 7.7 percent.
    As global risk sentiment improved, investors bought
growth-sensitive stocks. The sea transport sub-index 
rose 3.9 percent, making it the best sectoral performer, and the
mining sub-index was up 2.2 percent. 
    Stocks expected to benefit from Abe's reflationary policies 
continued to be in demand. The real-estate sub-index 
rose 1.4 percent.
    Sharp Corp, however, dropped 2.7 percent after the
Nikkei newspaper said on Monday that Apple Inc has
slashed orders with suppliers of LCD panels for the iPhone 5 in
the current quarter due to weak demand.
    Other Apple suppliers in Japan also came under pressure,
with Foster Electric Co Ltd falling 1.5 percent.
    The broader Topix gained 0.8 percent to 906.22 in
fairly active trade, with 3.5 billion shares changing hands.