Nikkei flat; gains capped by yen, political worry
TOKYO, Aug 26 (Reuters) – Japan’s Nikkei average was flat on Thursday, buoyed by short-covering and buying of futures but with gains capped by a lack of policy moves to rein in the yen’s strength as well as fears of longer-term policy inaction prompted by a murky political outlook.
Japanese ruling party powerbroker Ichiro Ozawa is likely to run in a party leadership vote on Sept. 14 in a challenge to Prime Minister Naoto Kan, Japanese media said, risking a bitter battle as the government struggles with a slowing economy.
While the yen retreated from a 15-year high against the dollar hit earlier this week, analysts said the latest political development was likely to make things tough for the stock market.
“The fact that Ozawa has said he’ll run … means that whatever Kan might say about policy, the markets won’t listen,” said Norihiro Fujito, general manager at the investment research and information division of Mitsubishi UFJ Morgan Stanley Securities.
“This also means that no new policy will be able to be enacted until after Sept. 14, which will also make it hard for stocks to rise.”
The benchmark NikkeiN225> started the day in positive territory, lifted by short-covering and buying of futures by long-term Japanese investors, market players said.
But it soon gave up those gains to dip 0.42 point to 8,844.76, after hitting a 16-month closing low on Wednesday. The broader Topix lost 0.2 percent to 805.89.
“Investors will closely watch to see if the government and Bank of Japan take any steps to deal with the strong yen,” said Hiroichi Nishi, general manager of the equity division at Nikko Cordial Securities.
“It’s essential for the markets to see them at least expressing some kind of resolute attitude.”
After four days of falls, during which it has lost roughly 500 points, the Nikkei looks oversold on a number of technical fronts, suggesting it might be ready for a rebound.
Its relative strength index (RSI) stood at 32, with everything from 30 and below considered oversold, while its slow stochastic — a measure of how oversold the market is — was deep within oversold territory.
But foreign investors, long a key driver of Nikkei moves, remain net sellers, limiting the longer-term outlook.
Orders placed through foreign brokerages prior to the opening showed that they were set to be net sellers of stocks to the tune of 10.3 million shares, while Ministry of Finance data showed that foreign investors sold a net 39.1 billion yen ($462 million) of Japanese stocks last week.
But shares of exporters gained, buoyed by short-covering after recent slides and as the yen pulled back slightly from a 15-year high hit against the dollar earlier this week.
Digital camera maker Canon Inc rose 0.8 percent to 3,455 yen and electronics parts maker Kyocera Corp added 0.4 percent to 7,130 yen. Panasonic Corp gained 1.1 percent to 1,054 yen. (Reporting by Elaine Lies; Editing by Chris Gallagher)
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