CORRECTED-Nikkei down as exporters fall on profit-taking

Mon Jan 7, 2013 8:54pm EST

(Corrects headline to show market has open)
    * Nikkei down 0.2 pct, Topix off 0.1 pct
    * Mothers market strong, small-to-mid size shares up
    * Market cautious before earnings season - trader

    By Ayai Tomisawa
    TOKYO, Jan 8 (Reuters) - Japan's Nikkei fell on Tuesday as
investors turned cautious over the index's recent rapid gains
and sold shares in exporters as the yen's depreciation paused,
but investor sentiment is supported by ongoing policy easing
hopes.
    The Nikkei dropped 0.2 percent to 10,575.16 in
mid-morning trade.
    Analysts said that investors took profits on some exporters'
recent gains now that the weakening of the yen appears to have
paused for the time being.
    Toyota Motor Corp shed 0.7 percent, Nissan Motor Co
 dropped 0.9 percent and Fanuc Ltd weakened 1.3
percent.
    "Market sentiment is still positive on the back of hopes for
further easing, but buying may pause on bellwether shares while
small caps may attract buying," said Hiroichi Nishi, general
manager at SMBC Nikko Securities, adding that domestic retail
investors have belatedly come back and have started buying small
caps.
    The Mothers Exchange, which lists small-to-mid size
companies, was up 0.4 percent after hitting the highest level
since Sept. 2011 on Monday.
    The dollar traded at 87.53 yen, retreating from a 2-1/2 year
high of 88.48 yen marked on Friday as robust appreciation over
the past month had investors opting to book profits despite
forecasts of further Bank of Japan stimulus later in the month.
    
    CAUTIOUS MOOD BEFORE 3Q EARNINGS
    As the majority of companies start releasing their earnings
for the Oct-Dec period mid to late this month, investors are
growing cautious amid anticipation of sluggish growth in
corporate profits, traders said.
    "Some stocks that have been rising won't see justifications
to rise further such as industrial machinery makers and some
autos as their third-quarter earnings are seen weak," said a
trader at a foreign brokerage. "Broadly, people remain bullish
but the market won't probably rise in a straight line."
    But he added that with expectations for the central bank to
come up with further stimulus measures, drops may be limited
despite possible profit-taking on exporters.
    New Prime Minister Shinzo Abe, whose Liberal Democratic
Party (LDP) surged to power in December's lower house election,
has called on the central bank to take bolder monetary stimulus 
measures to beat deflation, and possibly hold it accountable not
just for pushing up prices but also boosting job growth.
    A final decision will be made at the Bank Of Japan's next
rate review on Jan. 21-22, when it will debate setting a higher
inflation target than the current 1 percent goal.
    The Nikkei has risen about 22 percent since mid-November 
when Abe started calling for aggressive easing, taking the index
deeper into overbought territory. 
    Its 14-day relative strength index is at 77.02, far above 70
which is considered overbought and often indicates an imminent 
adjustment.
    The broader Topix shed 0.1 percent, to 879.88.


 (Editing by Eric Meijer)
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