Nikkei falls on caution over G20; BOJ candidate sours mood

Fri Feb 15, 2013 2:25am EST

* Index down 1.2 pct for day, up 0.2 pct for week
    * Conservative BOJ governor candidate unpopular in market
    * Worries over euro-zone fundamentals hit mood

    By Ayai Tomisawa
    TOKYO, Feb 15 (Reuters) - Japan's Nikkei share average fell
on Friday as investors pared  exposure to exporters and banks
while awaiting the weekend G20 meeting.
    A deepening recession in the euro zone also dragged down
shares, and sentiment deteriorated in late trade on news that a
conservative, former finance ministry bureaucrat is the leading
candidate to head the Japanese central bank. 
    The Nikkei closed down 1.2 percent at 11,173.83
after falling as much as 2.1 percent.
    For the week, the Nikkei avoided a second straight weekly
loss, squeezing out an 0.2 percent gain. Last week's drop
snapped a 12-week winning streak, its longest since 1959.
    Finance officials from G20 nations gathered in Moscow, where
they are expected to discuss Japanese economic policies that
have contributed to the yen's sharp decline against the dollar
since mid-November. The Nikkei has added about 30 percent over
the period. 
   "Investors who were waiting to take profits or shorting were
active today," said Hiroyuki Fukunaga, chief executive of
Investrust. "Now that most earnings are out and the yen's
weakness has steadied, it's the best timing for them to take
selling positions."
    On Friday afternoon, the market was hit by a sell-off after
sources close to the matter told Reuters that Japanese Prime
Minister Shinzo Abe is close to naming his nominee for governor
of the Bank of Japan, and that Toshiro Muto is the leading
candidate for the job. 
    Muto is seen as a conservative reformer, and thus may be
less likely to embark on an ultra-radical policy easing which
markets have been expecting from the BOJ as policymakers try to
reflate the economy.
    "Muto is considered that he would only follow traditional
ways such as expanding asset purchase programs. It would merely
be an 'enhanced version of the conventional way'," said Norihiro
Fujito, senior investment strategist at Mitsubishi UFJ Morgan
Stanley Securities.
    "Investors see that it would be difficult to meet the
(BOJ's) 2 percent inflation target without drastic easing. We
cannot picture Muto going bold like buying foreign funds which
could accelerate the yen's weakness."
    Other market analysts agreed.
    "It soured the mood, and some started dumping futures
contracts," said Hiroichi Nishi, an assistant general manager at
SMBC Nikko Securities.
    The broader Topix dropped 1.3 percent to 942.41,
with 4.51 billion shares changing hands, similar to last week's
average daily volume of 4.65 billion shares.
     Financials that have gained from the rally lost ground,
with Mizuho Financial Group Inc falling 5.8 percent as
the top-traded share by turnover on the main board. Mitsubishi
UFJ Financial Group slipped 2.9 percent.
    Automakers, whose share prices had jumped on expectations of
higher overseas revenue due to the yen's weakness, also fell as
some investors thought the one-way bet on the yen against the
dollar and euro was losing momentum.
    Toyota Motor Corp dropped 1.9 percent and Honda
Motor Co Ltd shed 1.6 percent.
    Analysts said that investors focus is again worries over the
euro-zone economy, as economic output in the euro zone fell by
0.6 percent in the fourth quarter. Germany contracted by 0.6
percent, marking its worst performance since the global
financial crisis was raging in 2009.
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