Nikkei turns higher but mood still cautious on U.S. deadlock
* Some exporters pressured after yen hits 8-wk high vs dollar * Mizuho drops after admitting officials knew of crime loans By Ayai Tomisawa TOKYO, Oct 9 (Reuters) - Japan's Nikkei share average erased early losses on Wednesday, moving away from a five-week low, but the mood stayed cautious as a lack of progress in resolving the U.S. budget standoff weighed on investor confidence. The Nikkei was up 0.2 percent at 13,918.49 in mid-morning trade. Earlier on Wednesday, it fell as far as 13,751.85, just above a five-week low of 13,748.94 hit on Tuesday. The broader Topix gained 0.4 percent to 1,154.76. U.S. President Barack Obama on Tuesday refused to give ground in a fiscal confrontation with Republicans, saying he would negotiate on budget issues only after they agree to re-open the federal government and raise the debt limit with no conditions. But early on Wednesday, U.S. stock futures rebounded from a one-month low on news that Obama will nominate Federal Reserve Vice Chairwoman Janet Yellen, seen as a proponent of dovish policy, as the next head of the Fed. "Sentiment is mixed with pessimism and optimism," said Hikaru Sato, a senior technical analyst at Daiwa Securities. "Investors are cautious for sure, but they do not want to reduce their holdings too much because it is possible to see a 2-3 percent spike in the index as soon as progress is made." Sato said the Nikkei may stay below the 14,000-mark for the time being but may not fall sharply from its current level this week. Some exporters lost ground after the yen hit an eight-week high of 96.55 to the dollar on Tuesday. A stronger yen erodes exporters' overseas earnings when repatriated and hurts their sales competitiveness. Sony Corp dropped 1.8 percent. Mizuho Financial Group fell 1.5 percent and was the second most traded stock by turnover after the bank's officials admitted top management knew at least three years ago about loans to criminal groups. In a report published on Tuesday, Credit Suisse cut its overweight position on Japan stocks to 7 percent from 16 percent because of such factors as weak momentum in the Japanese market and a lack of details in the government's growth strategy announced early this month. But it remains overweight due to factors including its view that the Bank of Japan will step up its quantitative easing in the first quarter of 2014 if inflation does not meet the BOJ's forecast. Such a move could weaken the yen to 115 yen to the dollar, the brokerage said. The Nikkei is up 33 percent this year, but is still down 13 percent from its May peak.
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