Nikkei continues bullish streak on weak yen, BOJ easing hopes

* Hopes for easing from BOJ supports market
* China-related stocks extend gains
* Google, Microsoft earnings hurt Yahoo Japan

By Sophie Knight
TOKYO, Oct 19 (Reuters) - Japan's Nikkei share average was
flat on Friday morning, as expectations of more easing from the
Bank of Japan were balanced by disappointing earnings from
Google Inc and Microsoft Corp.
However, the benchmark was still on track for its biggest
weekly gain in a year as robust risk appetite kept the yen soft,
boosting exporters, while China-related stocks extended gains
after data on Thursday hinted the country's slowdown is
bottoming out.
"The deceleration of China's economy seems to have dropped
its pace, which is a supporting factor, but basically people are
adjusting their positions before the BOJ meeting," said Hideyuki
Ishiguro, senior strategist at Okasan Securities.
The central bank is expected to admit at its next policy
meeting on Oct. 30 it will miss its 1 percent inflation target
for several years to come, according to sources, as it comes
under fresh political pressure to contain the effects of a
global slowdown on Japan's export-reliant economy.

"The focus is now not on whether they will ease or not, but
rather what kind of easing they will do. They understand that if
they don't put out something impressive enough to convince the
markets it will hurt the economy," Ishiguro said.
The Nikkei dropped 0.8 point to 8,982 yen after topping
9,000 earlier in the morning for the first time in three weeks,
with the banking sector and real estate
outperforming the index on hopes for monetary easing.
The index is currently up 5.5 percent up on the week, set
for the biggest gain since early December 2011.
Less pessimism about dwindling demand in China helped
industrial robotics maker Fanuc Ltd, which has large
exposure to the country, gain 2.7 percent, lending 13.2 positive
points to the index.
Similarly, machinery construction maker Komatsu Ltd
, often used as a barometer for sentiment towards China,
was just behind Fanuc as the third-most traded stock on the main
board, moving up 1.8 percent.
Yahoo Japan slipped 2.8 percent after Google's
third-quarter earnings and revenue came in well under forecasts
after its core advertising business slowed, sending its shares
down 8 percent, while Microsoft's quarterly profit fell more
than expected, hurt by the industry-wide slump in PC sales.
"There was bad news from Google and it's the last day of a
week in which the Nikkei has added 400 points, so I think we
could see some profit-taking on cyclicals today," said Masayuki
Doshida, senior market analyst at Rakuten Securities.
However, earnings in the U.S. have on the whole come in
stronger than expected, leading investors to judge last week's
aggressive sell-off as overdone and to buy back some battered
stocks.
NEC Corp bounced back 8.9 percent after falling 4.6 percent
on Thursday, after the Nikkei daily said its operating profit
for the April-September half had likely expanded sixfold on the
previous year and overshot guidance of 1 billion yen ($13
million) due to stronger-than-expected demand for its business
systems.
The Nikkei said sales for the period were likely to top the
1.4 trillion yen ($17.7 billion) mark.
In an opposite move, Hino Motors Ltd lost 1.7 percent as
investors sold the stock on a report of strong earnings, taking
profits after the share price rallied 13.3 percent this month on
speculation of positive profits.
The Nikkei daily reported that the vehicle maker's operating
profit will probably come in at a record 30 billion yen ($379
million) for the April-September first half after sales for
trucks and buses in Southeast Asia rose 40 percent.
The broader Topix index added 0.1 percent to 752.68.