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Nikkei falls 0.3 pct; awaits BOJ, U.S. data

Published 10/04/2010, 03:27 AM
Updated 10/04/2010, 03:28 AM
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* BOJ easing expected, market wants to see details -analyst

* Expected easing, yen intervention limit falls -analysts

* Support near 9,360, 13-wk moving average, retracement level

By Aiko Hayashi

TOKYO, Oct 4 (Reuters) - Japan's Nikkei fell 0.3 percent on Monday, taking its cues from the currency markets ahead of a Bank of Japan policy decision the next day with the market expecting further easing, albeit a minor move.

Former BOJ Deputy Governor Toshiro Muto said on Friday the central bank may ease policy as inaction would run the risk of spurring further yen gains, given the prospects for easing by the U.S. Federal Reserve.

The policy move expected most by economists polled by Reuters was yet another expansion of a cheap fund-supply tool that the BOJ set up in December and expanded in March and August.

"It is difficult to move actively before seeing the outcome of the BOJ's monetary policy, although the market is not expecting to see any big surprises," said Mitsushige Akino, chief fund manager at Ichiyoshi Investment Management.

"Reflecting the mood in the afternoon in which the Nikkei drifted down, it's more likely the market will test the downside after confirming the outcome of the BOJ meeting."

Trade is likely to remain nervous throughout the week, traders said.

"Nervous trade will likely continue this week, even after tomorrow's event, as U.S. jobs data is also set to be released later in the week," said Hiroaki Kuramochi, chief equity marketing officer at Tokai Tokyo Securities.

The benchmark Nikkei eased 23.17 points to 9,381.06, while the broader Topix fell 7.23 points, or 0.9 percent, to 822.74.

The Nikkei average briefly ventured into positive territory in the morning, reaching a session high of 9,508.36 as the dollar rebounded against the yen on short-covering.

But the Nikkei ran out of steam in the afternoon as the U.S. currency erased early gains, limiting active follow-through moves in the stock market.

In Asian trade, the dollar traded at 83.40 yen, having risen as high as 83.88 yen. Yet the U.S. currency was 0.3 percent higher against the yen after it found support at 83.15/16 last week, above its 15-year low of 82.87 yen set just before Japan intervened for the first time in six years on Sept. 15.

"The market has largely factored in the possibility of further easing at the (BOJ) meeting, but at this point it needs to see the actual content of the decision," said Masayuki Otani, chief market analyst at Securities Japan, Inc.

"With the yen staying on the strong side, investors are also waiting to see if there will be another round of intervention. If the BOJ eases and this is combined with intervention, that could have a bigger impact."

Market players see solid support for the Nikkei around 9,360, near its 13-week moving average. The 38.2 percent retracement of the Nikkei's move from 8,796 to the peak of its September rally at 9,704 also falls near that level.

Further support is expected around 9,344 yen, the Nikkei's 55-day moving average. One analyst said the 25-day moving average, which has been steadily moving upward and is now at 9,307, is another point of support for the index.

Resistance likely looms around 9,530, the upper level of the Nikkei's daily Ichimoku cloud on charts.

Wall Street rose on Friday, led by gains in resource stocks after data in China showed a pick-up in manufacturing activity.

SUMITOMO METAL JUMPS, DAIKIN FALLS

Exporters rose, with Sony Corp up 1.1 percent at 2,565 yen and Kyocera Corp advancing 1.4 percent to 8,110 yen.

Shares of Ricoh gained 2.9 percent to 1,218 yen after Credit Suisse upgraded the copier and printer maker's rating to "outperform" from "neutral" and raised its target share price to 1,450 yen from 1,300 yen.

Sumitomo Metal Mining shares climbed 3.3 percent to 1,317 yen after a jump in metals prices, with gold near a record high hit on Friday and copper prices at a two-year peak.

Credit Suisse said it had raised its forecasts to reflect Shinsei's amended medium-term business plan released last week, which included steps to cut expenses and lower credit costs.

But Daikin Industries slid 1.3 percent to 3,075 yen after the air conditioner maker said its first-half net profit would likely be 74 percent lower than its previous forecast due to losses on its stocking holdings.

Shares of Eisai dropped 3 percent to 2,853 yen after Morgan Stanley MUFG on Friday downgraded the drugmaker's stock rating to 'underweight' from 'equal-weight' and lowered its target stock price to 2,500 yen from 3,000 yen. (Additional reporting by Chikafumi Hodo in Tokyo and Reuters FX analyst Krishna Kumar in Sydney; Editing by Joseph Radford)

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