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Tokyo stocks drop on profit-taking despite BOJ measures

JIJI

Stocks retreated on the Tokyo Stock Exchange Friday, pressured by profit-taking after they briefly surged following the Bank of Japan’s unexpected decision to introduce supplementary monetary easing measures.

The 225-issue Nikkei average dived 366.76 points, or 1.90 percent, to end at 18,986.80. On Thursday, the key market gauge climbed 303.65 points.

The Topix index of all first-section issues plunged 27.61 points, or 1.76 percent, to close at 1,537.10, after rising 23.99 points the previous day.

After the central bank announced measures to supplement its quantitative and qualitative easing policy in the early afternoon, the Nikkei average jumped over 500 points at one point as many investors had expected that no action would come out of the BOJ’s policy meeting.

But the key market gauge soon lost stream and fell into negative territory as investors started to believe the BOJ’s supplementary measures lacked impact. The Nikkei average extended losses due to index futures-led selling, brokers said.

The BOJ’s measures include increasing its purchases of exchange-traded funds by ¥300 billion a year from ¥3 trillion at present.

Investors rushed to buy stocks immediately after the BOJ released the supplementary steps. Some analysts said it was a big surprise because the market’s consensus was that the BOJ would not make any change in its monetary policy.

However, “investors increasingly came to think that the amount of ETF buying was very small,” said Tomoaki Fujii, head of the corporate research division at Takagi Securities Co.

“The Nikkei would have closed around 19,200-19,300 if the BOJ keeps its monetary policy unchanged. But the lackluster supplementary measures ended up damping investor sentiment,” Fujii said.

Falling issues outnumbered rising ones 1,578 to 279 in the TSE’s first section, while 72 issues were unchanged.

Volume increased to 2.99 billion shares from Thursday’s 2.25 billion shares.

All 33 sector subindexes in the first section closed lower.

Lower crude oil prices in New York triggered selling of resource-linked names. Among them were oil companies Idemitsu Kosan, JX Holdings and Showa Shell, as well as trading houses Itochu, Sumitomo and Mitsubishi.

Megabank groups Mitsubishi UFJ and Sumitomo Mitsui and brokerage firm Nomura and insurer Dai-ichi Life slumped.

On the other hand, steel makers Nippon Steel & Sumitomo Metal and JFE Holdings drew buybacks.

Also on the plus side were drug makers Takeda and Ono Pharmaceutical and railway operator JR West.

In index futures trading on the Osaka Exchange, the key March contract on the Nikkei average lost 390 points to end at 18,950.