TOKYO, Sept 27: Japan’s Nikkei share average edged down in choppy conditions today morning as the market turned its focus to the government’s growth strategy and tax plans next week, while strong consumer inflation data had little impact.
The Nikkei shed 0.1 percent to 14,792.38 in mid-morning trade after opening a tad higher. The index is on track to add 0.2 percent this week.
Japan’s core consumer inflation in August rose 0.8 percent from a year earlier, hitting a fresh five-year high. But much of the gain in August came from high energy prices and a weaker yen inflating the cost of imports, which could cause some concern about a negative impact on household spending.
‘It still hasn’t gotten out of a phase of raw material prices pushing up the figure,’ said Hikaru Sato, a senior technical analyst at Daiwa Securities. ‘Many people are sceptical that the 2 percent inflation target will be achieved by 2015, but we see that the figure is on track to rise. The market is now focused on how the government will bolster growth through its fiscal policy.’
On Friday, bellwether exporters were mixed, with Toyota Motor Corp falling 0.9 percent, while Honda Motor Co gained 0.3 percent and Canon Inc dropped 0.3 percent.
Tokyo Electric Power Co bucked the weak trend, rising 6.8 percent and was the best performer by turnover as the company won approval for the Kashiwazaki Kariwa facility, the world’s largest nuclear plant.
The Topix was flat at 1,220.02.
Traders said the market may stay directionless for the rest of the day as investors focused on a slew of events next week.
On Oct. 1, Prime Minister Shinzo Abe is expected to announce whether the government will raise the sales tax to 8 percent from 5 percent in April. The government is also reportedly planning to unveil as much as 500 billion yen ($5.07 billion) in tax breaks for capital expenditure on the same day as well as 1.4 trillion yen in corporate tax cuts designed to help offset the impact of a planned sales tax increase.
‘If the government meets market expectations, the Nikkei may trade above 15,000 next week,’ Daiwa’s Sato said.
Focus will also turn to U.S. Jobs data due next Friday.
U.S. Weekly initial claims for unemployment benefits dropped 5,000 last week despite economists’ expectations of a rise. The claims data’s four-week moving average, a key gauge that smoothes out weekly volatility, dropped to 308,000, the lowest level since June 2007.
That fall could add to the case that the Fed is safe to go ahead with winding down its bond buying programme later this year.
‘What’s putting a lid on the Nikkei index is that the weak yen trend is being stalled,’ said Naoki Kamiyama, head of Japan equity strategy at Bank Of America Merrill Lynch. ‘The current market already priced in the weak yen helped by ‘Abenomics.’ Whether the yen is further weakened by the dollar’s rise on the back of a strong U.S. Economy is the key to higher share prices.’
Kamiyama expects the Nikkei to trade between 15,000-15,500 and the dollar to trade at 103 yen by the end of the year.
The greenback rose to 99.02 yen from a one-week low of 98.27. (AGENCIES)
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