Japan's Nikkei average fell 1.1 percent on Thursday after the Federal Reserve's caution on the US economic recovery and souring near-term technical prompted investors to take profits after a jump this month to three-week highs. Asian stock markets slightly pared falls after data showing China's annual economic growth eased to 10.3 percent in the second quarter, but inflation at the producer and consumer level also eased in June from May, reducing the need for further policy tightening.
The figures were announced just after the benchmark Nikkei ended morning trade, and saw S&P futures turn positive. In light trade, the benchmark Nikkei shed 109.71 points to 9,685.53, after falling as low as 9,667.00 at one stage. On Wednesday, the index rose nearly 3 percent to its highest close since late June. The broader Topix lost 1.6 percent to 856.60 on Thursday.
News from Japan's central bank had little impact on the market. The Bank of Japan revised up its economic forecast for the current fiscal year but reiterated that it will keep monetary policy easy, with deflation likely to persist at least until early 2011. The Nikkei hovered just above support provided by its 25-day moving average, currently at 9,680, and additional support on its daily Ichimoku charts at around 9,670, which was its kijun-sen.
The kijun-sen is an indicator of medium-term trends that can be either support or resistance but is currently pointing sideways, while Ichimoku charts are popular with Japanese traders. Resistance for the Nikkei stood near 9,760, a level where a downward trendline, drawn from the April 27 and June 21 peaks, comes in. Trade was light on the Tokyo exchange's first section, with 1.5 billion shares changing hands, the lowest volume in more than a week. Declining stocks outnumbered advancing ones by nearly 8 to 1.
Automakers lost ground after helping boost the broader market on Wednesday, when shares of Japan's top three automakers all jumped about 4 percent. Top automaker Toyota Motor Corp slid 2.3 percent to 3,175 yen and Honda Motor Co, the No 2, retreated 2.2 percent to 2,682 yen.