* Buying may have peaked out - analyst
* Nikkei breaches support level of 5-day moving average
* Nikkei slips 1.2 pct and Topix down 1.3 pct
* Nikkei has rallied nearly 7.5 pct over past two weeks
By Ayai Tomisawa
TOKYO, Nov 28 Japan's Nikkei average hit a
one-week closing low on Wednesday as exporters fell on their
perceived loss of profitability from a rising yen, with
investors also disappointed at an apparent lack of progress in
the U.S. fiscal standoff.
Exporters, notable gainers over the past two weeks, lost
ground on profit-taking after the dollar dropped below 82
yen, with Toyota Motor Corp, Honda Motor Co
and Canon Inc down between 1.6 and 3.1 percent.
Comments by U.S. Senate Majority Leader Harry Reid on
Tuesday over the lack of progress among Democratic and
Republican lawmakers to reach a deal to avoid a year-end 'fiscal
cliff' fanned investors' concerns.
"Buying may have peaked out, as there is a combination of
reasons to pull back," said Toshihiko Matsuno, a senior
strategist at SMBC Friend Securities.
"While looming concern about U.S. fiscal problems has been
on the back of people's minds, there is a sense of caution on
the BOJ's stance on monetary policy."
The Nikkei dropped 1.2 percent at 9,308.35,
breaching a support level of 5-day moving average at 9,341.98.
The Nikkei has rallied 7.5 percent over the past two weeks,
as the yen has weakened sharply on expectations main opposition
leader Shinzo Abe will win a Dec. 16 election and increase
pressure on the central bank to reverse the country's persistent
Abe has pressed the Bank of Japan to take more extreme
monetary easing steps, weakening the yen to a 7-1/2-month low of
82.84 against the greenback on Nov. 22. The Japanese currency
was quoted at 81.89 yen to the dollar on Wednesday.
Traders said that while some of his calls for easy monetary
policy seem possible, his demands are getting bolder and such
demands as foreign bond buying and an inflation target of 2
percent are unrealistic.
"The Abe trade is probably over," a dealer at a foreign bank
said. "The yen was triggering a lot of buying. People shifted
out of domestic into FX-sensitive names. That trade is almost
over as the FX is stalling at around 82 (yen to the dollar)."
TO CHASE OR NOT TO CHASE?
The trader said investors were facing a dilemma whether to
chase the market higher or move back into defensive stocks,
which are less affected by slowing global growth.
He nominated medical equipment maker Nihon Kohden Corp
, up 0.5 percent, as one firm with defensive qualities
as well as robust growth potential.
While short-term corrections are possible, some analysts see
a further rise before the end of the year.
The Nikkei is up 10.1 percent this year, trailing an 11.2
percent rise in the U.S. S&P 500 and an 11.6 percent gain
in the pan-European STOXX Europe 600 index.
"The current situation is based on expectations that Japan
may change under the next government," said Hisao Matsuura,
equity strategist at Nomura Securities, noting that the market
is still subject to short-term fluctuations.
"We can expect a steady rise after (the election)," he said,
adding that Nomura had a year-end Nikkei target of 9,500, 2.1
percent above Wednesday's closing levels.
Notable gainers included social gaming company DeNA Co Ltd
, a widely-held stock, which climbed 0.7 percent after
Morgan Stanley MUFG lifted its price target, citing strong
overseas growth potential.
The brokerage, however, cut the price target of DeNA rival,
Gree Inc. The stock dropped 3.2 percent.
The broader Topix fell 1.3 percent to 771.39 in
relatively light trade, with 1.73 billion shares changing hands,
down from Tuesday's 1.99 billion and last week's average of 1.95
In terms of valuations, Japanese stocks carry a 12-month
forward price-to-earnings of 12, slightly cheaper than the S&P
500's 12.5 but more expensive than the STOXX Europe 600's 11,
data from Thomson Reuters Datastream showed.