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Nikkei suffers sharp retreat on profit-taking and yen rise

JIJI

Stocks retreated sharply Monday, battered by selling to cash in gains as the yen firmed against other major currencies.

The Nikkei 225 average lost 165.56 points, or 1.52 percent, to end at the day’s low of 10,747.74. On Friday, the benchmark index soared 303.66 points to reach its best finish since April 30, 2010.

The Topix started off the week by falling 6.28 points to end at 905.16 after jumping 20.98 points Friday, its highest close since March 11, 2011.

Both indexes kicked off the week with modest gains after the Dow Jones industrial average closed at its highest level in five years and one month on receding concerns over the U.S. debt ceiling.

Nevertheless, they soon slipped into negative territory due chiefly to selling of mainstay export-oriented names amid the yen’s strengthening.

The firmness of the Japanese currency reflects position-adjustment moves prior to the announcement Tuesday of the outcome of the Bank of Japan’s two-day monetary policy meeting that started Monday, brokers said.

“The day’s selling does not signal changes in market sentiment. Selling from a sense of caution about precariously high prices and buying on dips were mixed,” said Masatoshi Sato, senior strategist at Mizuho Securities Co.

Investors have already factored in additional monetary easing steps expected to be taken by the BOJ, including an increase of about ¥10 trillion in the size of its asset purchase program, as well as the introduction of a 2 percent inflation target, brokers said.

After the BOJ announces a policy decision, “Tokyo stocks may be hit by a brief bout of selling as investors will have few prospects for additional positive factors,” Sato said. But such selling won’t mean investors are disappointed by the BOJ’s anticipated moves, he added.

Despite the key indexes’ drops, rising issues outnumbered falling ones 877 to 690 in the first section, while 131 issues were unchanged.

Volume decreased to 3.301 billion shares from 3.865 billion Friday.

A wide range of issues came under profit-taking pressure. Among them were Toyota and Mazda, technology names Canon and Toshiba, and insurers Dai-ichi Life and Tokio Marine.

Sumitomo Realty nose-dived 3.00 percent after Goldman Sachs revised down its investment rating for the company, brokers said.

On the other hand, retailer Marui rocketed 5.92 percent after Bank of America Merrill Lynch revised up its investment rating for the company by two notches, brokers said.

Also on the plus side were electronics maker Sony, nonbank lender Aiful and trading house Mitsubishi.

JGBs finish strong

Japanese government bonds rose Monday thanks to buying on dips prompted by the yen’s rebound and a stock selloff.

The lead March futures contract on 10-year JGBs gained 0.16 point from Friday to close at 144.41. Volume dropped to 21,428 contracts from 43,495 contracts.

In late interdealer trading in cash JGBs, the yield on the latest 327th 10-year issue with a 0.8 percent coupon was at 0.735 percent, down from 0.750 percent late Friday.