Japans Nikkei average fell 2 percent on Friday,hit by weak U.S. economic data that sent the dollar slipping back towards a 15-year low,as well as worries about what,if any,steps the Japanese government might take to stem the recent yen rise.
Markets are rife with speculation that the Bank of Japan,in an attempt to pre-empt government pressure for action,may loosen its already-easy monetary policy at an emergency meeting before or shortly after an expected meeting between BOJ Governor Masaaki Shirakawa and Prime Minister Naoto Kan next week.
But market players said that expectations of a policy easing were fading a bit as the afternoon wore on,prompting nervous investors to dump shares ahead of the weekend.
There have been a lot of market rumours out there about what might happen,and now that it looks as if nothing will happen today,a lot of people are getting rid of stocks,said Masayoshi Okamoto,head of dealing at Jujiya Securities.
As for any meeting next week,if nothing comes out in terms of concrete policy,the market could fall pretty sharply.
The benchmark Nikkei,which at one point fell more than 2 percent,shed 183.30 points to 9,179.38 and fell 0.8 percent on the week,for its second negative week in a row.
Analysts said that steps to stem the yens rise were crucial for the Nikkei. The dollar edged down to 85.30 yen,falling closer to a 15-year low of 84.72 yen hit last week.
Finance Minister Yoshihiko Noda said on Friday that his ministry was communicating with other Group of Seven countries on currencies amid growing worries that the strong yen would further dent Japans export-reliant economy,but analysts shrugged off the comments.
Just the fact that theyre talking doesnt mean that theyll get the U.S. and Europe to agree to something like joint intervention (to support the dollar),said Toshiyuki Kanayama,a market analyst at Monex Inc.
I dont see this as any sort of advance.
SUPPORT HOLDING,BUT HOW LONG?
The Nikkei was weak from early trade after Wall Street fell on discouraging U.S. economic data.
New U.S. claims for first-time jobless benefits scaled a nine-month high last week,while the Federal Reserve Bank of Philadelphia reported an unexpected contraction in manufacturing in the Mid-Atlantic region.
Whether the Nikkei could stay above 9,000 was a major focus this week,market players said,although several attempts over the past week to break through on the downside to a fresh 13-month low have been checked just under 9,100. The 9,000 to 9,100 area served as support on several occasions last year.
If the Nikkei breaks below 9,000,the next support would lie at 8,697,a 61.8 percent retracement of the rally between its March 2009 low and April 2010 high.
Market players said the results from any Kan-Shirakawa meeting were crucial,and that a renewed dollar slide could send the Nikkei down below 9,000.
If no positive news comes out of that,the yen will probably strengthen further and that will weigh on the Nikkei,said Koichi Nosaka,a market analyst at Securities Japan,Inc.
Although the chances of currency intervention by Japan may be low,the market at least wants to see the countrys strong resolve to protect its interests regarding its currency.
A Reuters poll of retail investors showed that more than one-third believe the yen will hit a record high versus the dollar this year,while sentiment towards domestic stocks fell to its lowest in eight months in August.
Canon Inc and other exporters slipped as the yen advanced against the dollar after the weak U.S. data.
Canon fell 2.2 percent to 3,600 yen and Kyocera Corp shed 3.1 percent to 7,540 yen.
Sharp fell 2.7 percent to 853 yen after the Nikkei business daily said the firm would reduce LCD panel production for up to two months starting this month,adjusting supplies as TV inventories pile up in the United States and China.
But Trend Micro,Japans top antivirus software maker,climbed 4.5 percent to 2,281 yen after Intel Corp said it would pay $7.7 billion for security software maker McAfee Inc
McAfee surged 57.1 percent and boosted the wider security sector,while the largest security company,Symantec Corp,rose 6.2 percent.
Some 1.56 billion shares changed hands on the Tokyo exchanges first section,with declining stocks outnumbering gainers by 10 to 1.