Nikkei falls on weak U.S. shares; Abe plan gets muted reaction

Tue Jun 24, 2014 9:46pm EDT

* Toraku ratio highest since Abe took office
    * Shows stock market clearly overbought

    By Ayai Tomisawa
    TOKYO, June 25 (Reuters) - Japan's Nikkei share average
edged down on Wednesday morning as investors took profits from
recent rallies, hit by weakness in Wall Street, while the
government's widely-anticipated growth strategy met a muted
market reaction.
    Prime Minister Shinzo Abe unveiled a package of measures on
Tuesday aimed at boosting Japan's long-term economic growth,
from phased-in corporate tax cuts and reform in the Government
Pension Investment Fund to a bigger role for women and foreign
workers. 
    The Nikkei dropped 0.5 percent to 15,301.79, still
comfortably sitting above its 25-day moving average of
14,970.74.
    The toraku ratio, or up-down ratio, shows that the market is
clearly overheated. The ratio is calculated by dividing the
25-day moving average of stocks on the Tokyo Stock Exchange's
first section that gained by the 25-day average of those that
fell. 
    A level above 120 signals an overheated market; Tuesday's
figure was 164. It was the highest since Dec 19, 2012, when the
market was rocketing just after Abe took office pledging to end
deflation and generate sustainable growth.
    "There was no big surprise in yesterday's announcement as it
was in line with what's been reported," said Takatoshi Itoshima,
chief portfolio manager at Commons Asset Management. "That said,
the market confirmed that Abe did flesh out details of the
corporate tax cut plan and GPIF reforms."
    He said that profit-taking may continue for a while amid the
signs of overheating, but there was no reason to sell
aggressively.
    Index-heavy weight stocks which include SoftBank Corp
 and Fanuc Ltd both fell 1.0 percent.
    Exporters were mixed, with Toyota Motor Corp adding
0.2 percent, Honda Motor Co flat, and Panasonic Corp
 falling 0.2 percent. 
    The dollar traded at 101.94 yen, having drifted on
either side of 102.00 for the past two weeks.
    The broader Topix fell 0.2 percent to 1,266.22 while
the new JPX-Nikkei Index 400 declined 0.2 percent to
11,516.66.

 (Editing by Eric Meijer)
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