* Nikkei down 0.7 pct, Topix off 0.6 pct
* Market disappointed with BOJ staying 'hands off' now
* Selling seen limited on expected new BOJ gov after April
By Ayai Tomisawa
TOKYO, Jan 23 Japan's Nikkei share average fell
on Wednesday after the Bank of Japan's latest aggressive easing
fell short of some expectations for immediate action, triggering
profit-taking in exporters such as automakers.
Analysts said that investors were disappointed that there
would be no action this year after the central bank on Tuesday
set a 2 percent inflation target and enhanced its asset purchase
programme by pledging open-ended asset purchases after 2014.
The Nikkei dropped 0.7 percent to 10,637.40, after
falling as much as 1.6 percent in early morning trade. It
retreated for a third day in a row from a 32-month intraday high
of 10,952.31 marked on Jan.15.
"The central bank is basically announcing what it plans to
do next year while it says it will stay 'hands off' for now. Can
the market approve that? Of course not," said Norihiro Fujito, a
senior investment strategist at Mitsubishi UFJ Morgan Stanley
Securities. He added that as soon as the BOJ announcement was
out, the securities firm started receiving calls from European
investors who were up early during the Asian time zone to
prepare to sell stocks and buy the yen.
But he added that a sell-off should be limited because while
current BoJ Governor Masaaki Shirakawa's term ends in April,
investors are positioned for further gains in the stock market
as most expect him to be replaced by someone whose stance on
aggressive policy easing matches that of Prime Minister Shinzo
"If Shirakawa's term were to last another two years or so,
the market would have lost 500 points or more," Fujito said.
"Whoever will be the next governor is expected to have a
'reflationary' mindset, in line with the government, and that's
Abe has made clear that he wants a BOJ governor who shares
his push to reflate the economy with a hyper-easy monetary
policy combined with big fiscal spending.
Exporters succumbed to profit-taking, with Toyota Motor Corp
falling 0.8 percent, Nissan Motor Co dropping
2.0 percent and Fanuc Corp shedding 1.1 percent.
The dollar last traded against the yen at 88.66. The
dollar had risen to 90.06 yen immediately after the BOJ
decision, not far from its 2-1/2-year high of 90.25 yen, but
Abe's calls for bold BOJ easing, dating back to mid-November
when he was the leading candidate to win a general election,
have helped to weaken the yen, in turn boosting exporters and
sparking a 23 percent rally in the Nikkei. A weak yen lifts
exporters' overseas earnings when repatriated.
Market observers also noted that a correction is natural and
should cool down the 'overbought' market.
"Some investors have been waiting for the timing to take
profits, as they have chased the market higher," said Hiroichi
Nishi, assistant general manager at SMBC Nikko Securities.
While some technical charts show that the stock market is
'overbought,' the toraku ratio, or up-down ratio, used for the
first section of the Tokyo Stock Exchange, was at 142. The ratio
is calculated by dividing the 25-day moving average of stocks
that gained by the 25-day average of those that fell. A level
above 120 signals an overheated market.
They added that a correction could pull down the market to
around its 25-day moving average of 10,355.66.
Analysts also said that investors' focus has shifted to
quarterly earnings announcements over the next few weeks, with
recent gains in exporters such as autos and technology not yet
backed up sufficiently by improvements in fundamentals.
Among Wednesday's losers, TDK Corp fell as much as
4.5 percent to 3,110 yen, its lowest level in nearly four weeks,
after the Nikkei business daily said the hard-disk drive and
electronic parts maker was expected to report a 30 percent fall
in operating profit for October-December due to weak demand for
The broader Topix dropped 0.6 percent to 895.67.