Nikkei ends down 0.2 per cent

Investors are now waiting to see if the Federal Reserve will consider or embark on new policy steps,with speculation rife that it may signal the chance of further monetary easing and possibly drive the yen towards its all-time high above 80 yen to the dollar.

8220;If the Fed takes steps to lower interest rates,given that the BOJ did nothing,that could lead to a higher yen,which is one reason the market has fallen this afternoon,8221; said Hideki Horikawa,a senior adviser at Himawari Securities.

8220;I myself think they still don8217;t need to do anything yet,but I8217;d guess that probably about 60 per cent of people in the market are expecting them to make some kind of move.8221;

Additional downward pressure came as Shanghai shares fell 1.8 per cent after the General Administration of Customs said July imports were up 22.7 per cent from a year before,lower than the market had expected.

The benchmark Nikkei shed 0.2 per cent or 21.44 points to 9,551.05 after spending the morning in positive territory. The broader Topix lost 0.3 per cent to 854.68.

Disappointing US jobs data on Friday fanned speculation that the Fed may soon buy US debt to support an economy that is showing signs of slipping back into recession and to fight potential deflation. It could also halt interest payments on banks8217; excess reserves to spur lending.

Market players expect the Nikkei to encounter resistance around 9,750,where they say large numbers of call options are lurking. The next upward target lies at 9,800,a mid-July peak that has blocked the Nikkei8217;s advance several times over the past month.

The Nikkei8217;s 13-week moving average,which has served as resistance for the past few months,now stands at 9,640.

But technicals suggest the Nikkei may move sideways for some time,with the benchmark facing resistance at the bottom of its Ichimoku cloud. Ichimoku charts are a popular charting method among Japanese traders.

The Nikkei8217;s MACD briefly edged above its zero line in morning trade but then fell back. A break above the zero line signals upward momentum.

EXPORTERS SLUGGISH

Trade was thin,with 1.48 billion shares changing hands on the Tokyo exchange8217;s first section,but above the volume marked on Monday,which was the lowest since late December.

Declining stocks outnumbered advancing ones by 3 to 1.

Some exporters lost ground as the dollar slipped against the yen,edging down 0.1 per cent to 85.92 after at one point rising within a hair of 86 yen,but others clung to gains.

Many Japanese exporters have set their currency rate assumptions around 90 yen per dollar for the financial year to next March,although Honda Motor Co cut its assumption to 87 yen from 90 yen. A stronger yen eats into exporter profits when repatriated.

Sony Corp shed 0.7 per cent to 2,681 yen and chip tester maker Advantest Corp slipped 0.8 per cent to 1,830 yen. Panasonic lost 1.2 per cent to 1,100 yen.

But Honda edged up 0.3 per cent to 2,873 yen. The company plans to reduce its Japanese car production by 4 per cent in October compared with the July-September quarter,in what would represent a small impact from the end of government subsidies to stimulate demand.

Robust earnings and forecast hikes boosted individual shares after a slew of good earnings kept the overall market supported last week.

Mitsubishi Materials,a nonferrous metals smelter,climbed 5.1 per cent to 249 yen after it swung to a profit in the the first quarter from a loss in the same period a year earlier and doubled its half-year operating profit forecast.

But Mitsui High-Tec slumped 10.7 per cent to 509 yen,its lowest in 17 months,after the maker of integrated circuit leadframes cut its earnings estimate for the six months ended July 31.

The company said it probably had an operating loss of 600 million yen 6.98 million compared with an earlier forecast for a 200 million yen loss,citing intensifying competition and a stronger yen.