Nikkei sags with expectations for BOJ action priced in

Mon Jan 21, 2013 2:02am GMT

By Sophie Knight
    TOKYO, Jan 21 (Reuters) - Japan's Nikkei share average
dipped in morning trade on Monday as the Bank of Japan began a
two-day policy meeting, stepping back somewhat after last week's
rally to a 32-month high on expectations the central bank will
take aggressive anti-deflation measures.
    A bounce in the yen gave impetus to profit-taking in stocks
and weighed on several exporters' shares.
    Shares reversed from Friday's sharp gains, when the
benchmark surged 2.9 percent, its biggest one-day gain in nearly
two years, as investors adjusted positions to price in news that
the central bank was preparing to approve major easing steps and
a new 2 percent inflation target.
    Heavyweight Fast Retailing Co Ltd lost 2.1 percent
after gaining 3 percent in the previous session, while the
insurance sector dropped 1.7 percent after jumping
5.5 percent on Friday.
    The Nikkei fell 1.1 percent to 10,794.40, moving
further away from a 32-month high of 10,952.31 hit last Tuesday.
    "I think everyone is in agreement that the direction the
(government and the central bank) are going in is good, but we
don't know whether they will actually be able to achieve their
aims," said Yuuki Sakurai, CEO and president of Fukoku Capital
Management.
    "While there are very high expectations in the stock market,
the trouble is that large manufacturers would be in trouble if
the yen weakens too much, as energy costs would rocket." 
    The electric and gas sector dropped 1.3 percent
on Monday morning and was the second worst-performing subindex
following an International Energy Agency report warning about
high Chinese demand and lower OPEC supplies, in addition to an
Algerian hostage incident that may also hamper production.
    Sharp Corp lost 3.2 percent after two sources told
Reuters that the company has nearly halted production of
9.7-inch screens for Apple Inc's iPad,  possibly as
demand shifts to its smaller iPad mini. 
    Running against the market, Seiko Epson Corp 
advanced 4.1 percent after JP Morgan upgraded the printer maker
to "overweight" from "neutral" and hiked its target price to
1600 yen from 700 yen, saying its global market share had
increased.
    "We forecast a strong euro and a better product mix to drive
the first top-line growth in eight years in FY2013, and think
forward profits will also be favourably positioned to exceed our
estimates," JP Morgan analyst Hisashi Moriyama wrote in a note.
    Exporters were also off as the yen firmed to 89.5 yen to the
dollar, leaving automakers Nissan Motor Co Ltd and
Honda Motor Co Ltd both down 0.9 percent.