Nikkei sheds 0.07 pct. as caution prevails
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Tokyo stocks retreated from recent five-week highs Thursday, with the key Nikkei stock index shedding 0.07 percent as Wednesday's buying frenzy prompted by the government's intervention into the foreign exchange market gave way to caution over the ability of the move to halt the yen's rise over the long-term.
Brokers said risk appetite was somewhat diminished following the initial impact of Wednesday's yen-selling, which brought Japan 's currency off a recent string of 15-year highs against the U.S. dollar, as investors are now less likely to chase higher equities until the longer term impact of the forex intervention can be determined.
Other analysts said that the yen's depreciation had been less than expected and although short-covering helped support the market in early trade and boost some issues reliant on profits made overseas, not all exporters found favor.
"The yen's retreat hasn't been as big as the market had hoped -- dollar/yen has yet to touch 86 yen -- and the yen remains on the strong side. That weighed on stocks that have been boosted by short-covering. New money isn't really flowing in," said Mitsushige Akino, chief fund manager at Ichiyoshi Investment Management Co.
Japan intervened on Wednesday morning in the foreign exchange market for the first time since 2004 to halt the yen's relentless gains which have hampered the nation's export-led recovery.
With the yen's appreciation to 15-year highs against the U.S. dollar recently, Japanese issues have become an unattractive proposition for investors.
The yen hit lows of 85.77 against the U.S. dollar Thursday in Tokyo from 84.86 at the bell Wednesday, but strengthened to 85.23 in later trade, flashing a warning sign to investors not be over zealous about the effectiveness of the government's move.
The 225-issue Nikkei Stock Average lost 7.06 points from Wednesday to 9,509.50, while the broader Topix index of all First Section issues on the Tokyo Stock Exchange was down 3.93 points, or 0.46 percent, to 844.71.
Considering the yen reached its highest level since 1995 yesterday before the government's announcement, which caused the yen to depreciate in lightening-quick fashion, exporters are content for the time being, but some market players anticipate further intervention if the dollar slips back below 85 yen.
Both Prime Minister Naoto Kan and Finance Minister Yoshihiko Noda have reiterated their commitment to taking further "decisive" measures if deemed necessary. Kan himself has been under intense pressure from big business to actively curb the yen's rise, which has been severely hampering Japan's export-led recovery.
Japanese exporters, many of whom have set their assumption rates for dollar/yen at 90 yen and at 110-115 yen for euro/yen in the year to March 2011, see profits eroded when repatriated if the yen is strong.
However, some analysts questioned the government's willingness to repeat the move and questions have also been asked as to not only whether a weaker yen could be sustained, but if the move, being a unilateral one, was the right call.
Sony Corp. rose 1.7 percent to 2,641 yen and Canon Inc. gained 0.5 percent to 3,855 yen. Industrial robotics giant Fanuc Inc. advanced 1.6 percent to 10,220 yen and was the Nikkei's biggest gainer Thursday.
Sharp Corp., Japan's biggest maker of liquid crystal display panels, rose 2.6 percent to 893 yen. The company plans to raise output of the components as early as this month at a factory in Sakai, western Japan, after cutting production about 10 percent last month.
Toyota Motor Corp, the world's biggest carmaker, gained 1.7 percent to 3,060 yen. The company may provide hybrid technologies to Daimler AG at the request of the German automaker, the Nikkan Jidosha newspaper reported.
Financial issues retreated however, with Dai-ichi Life Insurance Co., Japan's No. 2 life insurer, plunging 4.2 percent to 101,700 yen. The company's share-price estimate was cut to 160,000 yen from 210,000 yen at UBS AG.
Among Japan's megabanks, Mitsubishi UFJ Financial Group Inc. lost 1 percent to 413 yen and Sumitomo Mitsui Financial Group Inc., retreated 1.5 percent into negative territory by the 3 p.m. bell.
Some 1.82 billion shares changed hands on the Tokyo Exchange's First Section, down from Wednesday's volume of 2.35 billion shares, with declining issues outnumbering advancing ones by 1,006 to 487.
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