* Stronger yen prompts profit-taking after rapid rally
* Exporters, securities firms lead losses
* Fast Retailing slips after GS downgrade
* Boeing Dreamliner suppliers in Japan weak
By Sophie Knight
TOKYO, Jan 16 Japan's Nikkei share average fell
2.6 percent on Wednesday, its biggest one-day drop in eight
months, as a rebound in the yen prompted investors to take
profits on recent outperformers such as shares of exporters.
The Nikkei lost 278.64 points to 10,600.44, toppling
from a 32-month high hit on Tuesday. It also dropped out of
"overbought territory", with its 14-day relative strength index
coming back under the 70-mark for the first time since Dec. 21.
Toyota Motor Corp fell 2.6 percent, Canon Inc
dropped 4.1 percent and Fanuc Corp shed 4.3
The yen, which has fallen more than 1 percent against the
dollar so far this year, rebounded for a second day on Wednesday
after a government official said further softness in the yen
could harm importers and fuel costs, adding to similar comments
from another minister this week.
Shigeru Ishiba, secretary general of the Liberal Democratic
Party, said that it is desirable for the dollar to trade at
around 85 yen to 90 yen. The dollar last traded 88.11,
pulling away from a 2-1/2-year high of 89.67 set on Monday.
"Both these comments seemed to be the first time that there
was an element of a pushback to the surprisingly singular and
consistent message from Abe," said Stefan Worrall, director of
equity cash sales at Credit Suisse in Tokyo.
The Nikkei has rallied about 24 percent over the past two
months, spurred by weakness in the yen after Japan's new leader
Shinzo Abe called on the Bank of Japan to adopt aggressive
policies to energise the ailing economy, including setting an
annual inflation target of 2 percent.
A survey by Bank of America Merrill Lynch found that a net 3
percent of foreign investors are now overweight on Japanese
equities, a 23 percent increase from last month, while a net 4
percent said the outlook for Japanese corporate earnings was now
favourable, up 22 percent from December.
However, increased enthusiasm for the Japanese market has
left it looking overheated, with its shares looking expensive in
comparison with other markets.
Japanese equities carry a 12-month forward price-to-earnings
ratio of 13.1, above the U.S. S&P 500's 12.9 and the
pan-European STOXX Europe 600's 11.6, data from Thomson
Reuters Datastream showed.
Traders said that a pause in the yen's weakening trend
triggered selling in shares that had gained recently, which
could drag the index below the 10,500-mark in the coming days.
Shares of Boeing Dreamliner suppliers in Japan came under
pressure after All Nippon Airways Co grounded all 17 of
its Boeing 787 planes for inspection after one of its
Dreamliners made an emergency landing in western Japan on
GS Yuasa Corp lost 4.5 percent, while Fuji Heavy
Industries and Mitsubishi He7011./avy Industries
and IHI were down between 2.9 and 4 percent.
ANA fell 1.6 percent.
Heavyweight Fast Retailing Co Ltd also dragged,
shedding 4.6 percent after Goldman Sachs downgraded the Uniqlo
store operator, saying its earnings outlook was already
sufficiently priced into the share price.
Fast Retailing had gained 4.6 percent between November 15
and Tuesday's close.
Among other losers, securities firms, which have been
beneficiaries of the strong market, also succumbed to
profit-taking. Nomura Holdings fell 2.8 percent and
Daiwa Securities Group slipped 4.3 percent.
WILL THE BOJ STEP IN?
The broader Topix lost 2 percent to 888.11, prompting
expectations that the BOJ would buy more exchange-traded funds
(ETFs) to support the market, as it has customarily done in the
past when the index falls below 1 percent in the morning
The BOJ, which will hold its policy review on Jan. 21-22,
last purchased ETFs on Nov. 8 last year but is widely expected
to further increase buys of assets such as government bonds.
"It will be an interesting test in the sense that maybe
they're kind of happy with how far it's gone already and (they
feel like) their job is sort of done," Worrall of Credit Suisse