CORRECTED-Nikkei retreats from multiyear highs on Cyprus concerns, exporters fall

Fri Mar 22, 2013 2:45am EDT

(Corrects Nikkei's consecutive weekly gain to five in the third
paragraph)
    * Exporters with exposure to Europe falter
    * Investors sell before weekend as Cyprus bailout eyed
    * Foreigners will likely continue buying Japanese stocks in
long-term - analyst

    By Ayai Tomisawa
    TOKYO, March 22 (Reuters) - Japan's Nikkei share average
fell on Friday, erasing previous session gains on worries Cyprus
may default on its debt, while an uptick in the yen hurt
exporters.
    The Nikkei dropped 1.5 percent to 12,446.68 by the
midday break, retreating from 12,650.26 hit on Thursday, the
highest intraday level since early September 2008.
    The index is down 0.9 percent for the week and is poised to
snap a run of five consecutive weekly gains.
    Exporters with high exposure to Europe led the declines,
with Mazda Motor Corp sliding 2.0 percent, Nikon Corp
 dropping 3.1 percent and Shimano Inc shedding
2.3 percent.
    "These are part of the stocks investors want to unload when
uncertainty over Europe grows," said Naoki Fujiwara, a fund
manager at Shinkin Asset Management.
    Stock losses accelerated in late morning trade, as investors
locked in profits before the weekend.
    "They were quick to take profits as they are worried that
U.S. stocks may fall later in the day on Cyprus fears," said
Kenichi Hirano, a strategist at Tachibana Securities.
    The heightened worries about Cyprus and risk of contagion in
 the euro zone have seen investors seek shelter in the
safe-haven yen. That has put pressure on the Nikkei as investors
fret the recent weakening trend in the yen may stall and
undermine the export-driven economy.
    The dollar last traded at 94.95 yen, having fallen
more than 1 percent from the previous day, while the euro traded
at 122.60 yen, falling 1.4 percent.
     The European Union gave Cyprus till Monday to raise the
billions of euros it needs to secure an international bailout.
Failing that, it could face a collapse of its financial system
that could push it out of the euro currency zone. 
    Souring the mood further, Standard & Poor's cut Cyprus
credit rating deeper into junk status and a survey showed the
euro zone's economic downturn has deepened this month, even
before Cyprus's bailout debacle.
    The broader Topix dropped 0.9 percent to 1,048.16.
    Some defensive stocks bucked the market, with Kakaku.com
 rising 2.9 percent after the Nikkei newspaper said the
company's "Tabelog" restaurant review website was expected to
log a sales increase of 50 percent in the next fiscal year
starting April.
    Online gaming company DeNA Co rose 3.3 percent
after Citigroup, which maintained a 'buy' rating on the stock,
raised its target price to 4,500 yen from 3,900 yen, saying that
its domestic business momentum is strong.
    The Nikkei has gained about 20 percent this year, and the
yen has weakened 10 percent on the back of Prime Minister Shinzo
Abe's bold fiscal expansionary and monetary easing policies
aimed at ending persistent deflation and reviving the economy.
    On Thursday, new Bank of Japan governor Haruhiko Kuroda told
a news conference further bold easing measures were needed to
beat deflation. 
    With Kurodo providing few clues on calling an emergency
meeting before April 3-4 to push through stimulus, analysts said
the Nikkei is unlikely log big gains ahead of the meeting.
    In the longer term, however, as the recovery in the U.S.
economy gathers momentum, foreign investors are likely to pour
more money into Japanese equities, analysts said.
    In the past 18 weeks through March 16, foreign investors
bought 5.83 trillion yen worth of Japanese equities, versus 5.80
trillion yen in their 19 straight weeks of net buying from late
2005 to early 2006 when Junichiro Koizumi was the prime
minister.
    "The Japanese market could add solid gains in the long run
if the U.S. economy's recovery strengthens the dollar; then we
may get similar rallies seen back in 2005-2006 if the dollar
trades around 120 yen like it did at that time," said Michiro
Naito, executive director of equity derivatives strategy at
JPMorgan.

 (Reporting by Ayai Tomisawa; Editing by Shri Navaratnam)
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