Nikkei edges down after rally; BOJ, Fed awaited

By Aiko Hayashi

TOKYO (BestGrowthStock) – Japan’s Nikkei average fell 0.3 percent on Tuesday, with profit-taking in recent gainers such as Canon Inc (7751.T: ) weighing on the index in the wake of its rise to a seven-week high the previous day.

But Sony Financial Holdings (8729.T: ) surged on a new investment policy and Toyota Motor Corp (7203.T: ) gained after it said it had found no evidence to support the driver’s version of a widely publicized “runaway” Prius episode a week ago.

Trade was in general range-bound, with investors reluctant to aggressively take positions ahead of monetary policy decisions by the U.S. Federal Reserve and the Bank of Japan this week.

Sources familiar with the thinking of Japan’s central bank have told Reuters it is leaning toward easing monetary policy at its two-day policy review that ends on Wednesday, under pressure from a government calling for action to beat deflation and which some analysts suspect is aimed at weakening the yen.

The market is keen to see if the BOJ will decide to expand its three-month fixed-rate fund supply operation, either by increasing the amount from the current 10 trillion yen ($110.5 billion) or by extending the length of the operation to six months or longer.

“The market has been rising on hopes for an easing in policy by the BOJ, but if it decides not to expand the policy, which is likely in my opinion, the stock market could lose ground following the news,” said Soichiro Monji, chief strategist at Daiwa SB Investments.

“But recent economic indicators are not particularly poor, and selling on disappointment in the market will likely last only for a day or so. Eyes will be on China’s tightening moves.”

In light trade, the benchmark Nikkei index ended down 30.27 points at 10,721.71 (.N225: ), having slipped from Monday’s seven-week intraday high of 10,808.84.

The broader Topix index was almost unchanged at 938.10 (.TOPX: ).

Later on Tuesday the interest-rate setting committee of the U.S. Federal Reserve holds a one-day meeting in which the central bank is widely expected to repeat its promise to keep borrowing costs exceptionally low for “an extended period”.

EXPORTERS, RESOURCE SHARES WEAKER

Shares of stocks that had risen recently lost ground, with some exporters further pressured by a slightly stronger yen. The dollar fell 0.4 percent to 90.13 yen, while the euro slipped 0.2 percent to 123.40 yen.

Canon, which had climbed to its highest since late 2008 the day before, fell 1.3 percent to 4,110 yen, despite a media report that it will likely post a near quadrupling of operating profit in the January-March quarter.

Honda Motor Co (7267.T: ) retreated 1.5 percent to 3,245 yen and TDK Corp (6762.T: ) fell 0.9 percent to 5,760 yen.

Commodities-linked shares including oil and gas field developer Inpex (1605.T: ) slipped after oil and metals fell almost 2 percent on Monday, hurt in part by fears that China may step up monetary tightening measures.

Inpex fell 1.2 percent to 642,000 yen, while trading houses Mitsui & Co (8031.T: ) shed 1.2 percent to 1,519 yen and Itochu Corp (8001.T: ) dropped 2.1 percent to 763 yen.

Sony Financial, the life insurance arm of Sony Corp (6758.T: ), soared 13.8 percent to 298,100 yen after it said it would boost investment in bonds and cut exposure to stocks, aiming to reduce risk and boost a key measure of its corporate value.

Shares in Toyota (7203.T: ) rose 1.3 percent.

Some 1.7 billion shares changed hands on the Tokyo exchange’s first section, falling from Friday’s seven-week high, when volume was 2.8 billion shares.

Investment Research

Advancing stocks and declining ones were almost evenly matched, 747 to 738. (Additional reporting by Masayuki Kitano; Editing by Edwina Gibbs)

Nikkei edges down after rally; BOJ, Fed awaited