Japan's Nikkei average fell 1 percent on Friday, hurt by the yen trading near a 15-year peak against the dollar and by profit-taking after the Bank of Japan's policy easing this week had driven stocks higher. Investors were also keen to unwind positions ahead of key US payroll data later in the day, which may provide clues as to whether the Federal Reserve will resume quantitative easing, and ahead of a three-day weekend in Japan.
Despite its softness on Friday, the Nikkei gained 2 percent on the week, its best weekly performance since mid-September, as investor confidence improved after the BoJ on Tuesday cut interest rates to virtually zero and pledged to pump more funds into the struggling economy.
"The market faced pressure as the BoJ's steps haven't proven to be really effective on the currency markets, with the yen remaining on the strong side ahead of the US jobs data and due to speculation for quantitative easing by the Fed," said Junichi Misawa, senior fund manager at STB Asset Management. The benchmark Nikkei ended the day down 95.93 points at 9,588.88, speeding up its fall as it headed into the close.
The broader Topix fell 0.8 percent to 839.44. The yen stood at 82.38 against the dollar, not far away from a 15-year high of 82.11 yen reached the previous day. Caution over possible Japanese intervention has increased since the yen rose beyond 82.87 - the level where Tokyo intervened for the first time in six years on September 15. After the close, Fast Retailing forecast a 14.3 percent fall in annual operating profit this business year, as sales at its Uniqlo casual clothing chain lose steam. The stock had ended the day down 2.3 percent.
Although the Nikkei edged lower, market participants said technical sentiment had turned bullish especially after breaking through several chart points this week. The 25-day moving average of 9,411 and the 75-day average of 9,399 have become major technical support levels.
"The Nikkei may be under downward pressure, but there is plenty of demand to buy on dips based on strong technical trends," said Hiroichi Nishi, general manager of equity marketing at Nikko Cordial Securities. Property stocks ran out of steam after posting strong gains this week on the central bank's plan to set up a $60 billion fund to buy a wide range of assets, including Japanese real estate investment trust (J-REITs). Mitsubishi Estate lost 1.3 percent to 1,489 yen, but has gained about 7 percent since the BoJ news.
Exporters fell hurt by the yen as the strong home currency eats into their earnings when repatriated and curbs their competitiveness overseas. Tokyo Electron Ltd slipped 2 percent to 4,575 yen and Canon Inc fell 1.2 percent to 3,830 yen. Seven & I Holdings fell 3.7 percent to 1,975 yen after Japan's largest retailer kept its annual forecasts unchanged due to weakness at its large retail outlets, disappointing investors hoping government stimulus efforts would improve its outlook. Some 1.97 billion shares changed hands on the Tokyo exchange's first section, down from a five-month high of 2.88 billion booked on Wednesday.
Declining stocks outnumbered advancing ones by more than 2 to 1.
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