TOKYO, Mar 22: Japan’s Nikkei share average fell on Friday, erasing previous session gains on worries Cyprus may default on its debt, while an uptick in the yen hurt exporters.
The Nikkei dropped 1.5 percent to 12,446.68 by the midday break, retreating from 12,650.26 hit on Thursday, the highest intraday level since early September 2008.
The index is down 0.9 percent for the week and is poised to snap a run of four consecutive weekly gains.
Exporters with high exposure to Europe led the declines, with Mazda Motor Corp sliding 2.0 percent, Nikon Corp dropping 3.1 percent and Shimano Inc shedding 2.3 percent.
‘These are part of the stocks investors want to unload when uncertainty over Europe grows,’ said Naoki Fujiwara, a fund manager at Shinkin Asset Management.
Stock losses accelerated in late morning trade, as investors locked in profits before the weekend.
‘They were quick to take profits as they are worried that U.S. Stocks may fall later in the day on Cyprus fears,’ said Kenichi Hirano, a strategist at Tachibana Securities.
The heightened worries about Cyprus and risk of contagion in the euro zone have seen investors seek shelter in the safe-haven yen. That has put pressure on the Nikkei as investors fret the recent weakening trend in the yen may stall and undermine the export-driven economy.
The dollar last traded at 94.95 yen, having fallen more than 1 percent from the previous day, while the euro traded at 122.60 yen, falling 1.4 percent.
The European Union gave Cyprus till Monday to raise the billions of euros it needs to secure an international bailout. Failing that, it could face a collapse of its financial system that could push it out of the euro currency zone.
Souring the mood further, Standard & Poor’s cut Cyprus credit rating deeper into junk status and a survey showed the euro zone’s economic downturn has deepened this month, even before Cyprus’s bailout debacle.
The broader Topix dropped 0.9 percent to 1,048.16.
Some defensive stocks bucked the market, with Kakaku.Com rising 2.9 percent after the Nikkei newspaper said the company’s ‘Tabelog’ restaurant review website was expected to log a sales increase of 50 percent in the next fiscal year starting April.
Online gaming company DeNA Co rose 3.3 percent after Citigroup, which maintained a ‘buy’ rating on the stock, raised its target price to 4,500 yen from 3,900 yen, saying that its domestic business momentum is strong.
The Nikkei has gained about 20 percent this year, and the yen has weakened 10 percent on the back of Prime Minister Shinzo Abe’s bold fiscal expansionary and monetary easing policies aimed at ending persistent deflation and reviving the economy.
On Thursday, new Bank of Japan governor Haruhiko Kuroda told a news conference further bold easing measures were needed to beat deflation.
With Kurodo providing few clues on calling an emergency meeting before April 3-4 to push through stimulus, analysts said the Nikkei is unlikely log big gains ahead of the meeting.
In the longer term, however, as the recovery in the U.S. economy gathers momentum, foreign investors are likely to pour more money into Japanese equities, analysts said.
In the past 18 weeks through March 16, foreign investors bought 5.83 trillion yen worth of Japanese equities, versus 5.80 trillion yen in their 19 straight weeks of net buying from late 2005 to early 2006 when Junichiro Koizumi was the prime minister.
‘The Japanese market could add solid gains in the long run if the U.S. Economy’s recovery strengthens the dollar; then we may get similar rallies seen back in 2005-2006 if the dollar trades around 120 yen like it did at that time,’ said Michiro Naito, executive director of equity derivatives strategy at JPMorgan.
(agencies)
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