BOJ chief's remarks, retail buyers trim Nikkei's fall on Cyprus concern

TOKYO Tue Mar 26, 2013 7:34am GMT

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TOKYO (Reuters) - The Nikkei average edged lower on Tuesday on renewed concerns on debt woes in the euro zone, though the decline was capped by hopes the Bank of Japan will boldly ease monetary policy.

The benchmark Nikkei .N225 closed down 0.6 percent to 12,471.62, falling below its five-day moving average of 12,492.11.

The Cyprus bailout deal is forcing large uninsured depositors and bondholders to bear heavy losses, and Dutch Finance Minister Jeroen Dijsselbloem, who heads the Eurogroup of euro zone finance ministers, said the Cyprus bailout represented a new model for resolving banking crises in the currency bloc.

While the Tokyo market opened weak, stocks came off lows after the Bank of Japan's new Governor, Haruhiko Kuroda, signalled bold easing.

He said that the central bank will seek to push down yields across the curve by purchasing longer-dated government bonds, underscoring the BOJ's resolve to expand its balance sheet more aggressively to beat deflation.

Also supporting the market were retail investors, as Tuesday was the last day to acquire stocks and qualify for the next-declared dividends. From Wednesday, shares will trade ex-dividend.

Domestic retail investors were active trying to buy shares that carry dividends, said Naoki Fujiwara, chief fund manager at Shinkin Asset Management.

"Meanwhile, not many institutional investors were participating in today's trade, with the end of the fiscal year approaching, and foreign investors were nervously watching how the Cyprus situation unfolds," he said.

Currency-sensitive exporters led declines. Mazda Motor Corp (7261.T) shed 4.4 percent. Sony Corp (6758.T) fell 2.7 percent and Nikon Corp (7731.T) dropped 1.9 percent as the yen was quoted at 94.18 to the dollar, hovering near a more than one-week high of 93.45.

Defensive plays, however, bucked the trend. The electric and gas sub-index .IEPNG.T gained 1.8 percent as the best sectoral performer. The foods .IFOOD.T and the pharmaceutical sub-indices rose 0.8 percent and 0.5 percent, respectively.

Index heavyweight Softbank Corp (9984.T) climbed 2.5 percent and was the most traded stock on the main board by turnover after its mobile unit said it will launch a tender offer to make game developer Gungho Online Entertainment Inc 3765.OS a consolidated subsidiary. Gungho sank 4.6 percent.

The broader Topix .TOPX index dropped 0.3 percent to 1,044.42 with 2.99 billion shares changing hands.

INVESTORS BULLISH ON JAPAN

Investors are growing increasingly confident about Japanese stocks "backed by hopes for the BOJ's aggressive easing and public spending," said Kyoya Okazawa, Tokyo-based head of global equities at BNP Paribas.

Okazawa, who visited clients in Hong Kong recently, said investors show rising interest in Japanese equities, and are less optimistic about other markets, which face risks including inflationary pressure.

"Still, long-only investors are underweight on Japan, but the Japanese market will likely stay strong until the upper house election in the summer," he said.

"After that, investors will likely seriously question how (Prime Minister Shinzo) Abe is going to boost the country's growth through his growth strategy."

The benchmark Nikkei has rallied 44 percent since mid-November, when Abe unveiled proposals, during his election bid, for expansionary fiscal and monetary policies to revive the economy.

"At the end of May 2012, over 20 percent of Japanese stocks qualified as Deep Value. That number has since dropped to just 5 percent, making Japan the second-most expensive region on this basis behind the U.S.," Societe Generale wrote in a note.

"Japan is now going to have to demonstrate improving fundamentals to warrant further upside," it added.

(Additional reporting by Ayai Tomisawa; Editing by Richard Borsuk)

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