* Exporters with high exposure to Europe underperform
* Foreigners will likely continue buying Japanese stocks in
long-term - analyst
* Foreigners bought 5.83 trillion yen worth Japan shares in
By Ayai Tomisawa
TOKYO, March 22 Japan's Nikkei share average
fell on Friday, pulling back from a 4 1/2-year high marked on
the previous day on worries Cyprus may default on its debt,
while gains in the yen hurt exporters.
The Nikkei dropped 1.4 percent to 12,458.31,
retreating from 12,650.26 hit the previous day, the highest
intraday level since early September 2008.
"The renewed concerns about a Cyprus bailout is hitting the
mood. Investors worry about the effect on the euro zone. The
Tokyo market has 'overbought signs' anyway, so profit-taking
won't be surprising," said Hiroichi Nishi, an assistant general
manager at SMBC Nikko Securities.
The Nikkei traded 6.8 percent above its 25-day moving
average. When the index moves more than 5 percent above the
technical line, it is considered overbought.
Exporters with high exposure to the euro zone led the
declines, with Mazda Motor Corp sliding 2.3 percent,
Sony Corp falling 2.7 percent, Nikon Corp
dropping 2.8 percent and Shimano Inc tumbling 3
"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.
The heightened worries about Cyprus and risk of further
problems for 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 94.94 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
Further denting sentiment, 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.
Stocks that benefited from the Japanese government's
reflationary policy also lost ground, with Mitsubishi UFJ
Financial Group falling 0.9 percent and Sumitomo Mitsui
Financial Group shedding 1.0 percent.
The broader Topix dropped 0.8 percent to 1,049.43.
The Nikkei has gained 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
Analysts said that unless there is a new development, such
as the BOJ calling an emergency meeting to discuss easing
monetary policy before a regular rate review on April 3-4, big
gains in the Nikkei are unlikely before the policy 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
"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