* Nikkei slips 0.3 pct, but still posts best Q1 since 1988
* Fanuc falls in heavy volume after broker downgrade
By Dominic Lau
TOKYO, March 30 Japan's Nikkei share average
fell for a third straight session on Friday as investors
pocketed gains from the strongest first quarter rally in 24
years, while the market waited on key global events next week
Despite the dip, the Nikkei ended the quarter up
19.3 percent - its best quarterly performance since the second
quarter of 2009 - as robust U.S. economic data and accommodative
central bank policies helped drive a global equities rally.
Market players said the benchmark had entered a much-needed
correction after its surge and was likely to consolidate around
current levels ahead of key economic data and events next week.
The Nikkei closed down 0.3 percent at 10,083.56, moving
further from a one-year closing high of 10,255.15 on Tuesday.
"I took some profits on some financial stocks, such as the
megabanks and securities firms this month. I am just waiting for
the weakness to buy again and the new earnings guidance from
companies for the fiscal year 2012/13," said Yasuo Sakuma,
portfolio manager at Bayview Asset Management.
Megabanks Mitsubishi UFJ Financial Group and
Sumitomo Mitsui Financial Group fell more than 1.8
percent. But they are still up at least 26 percent this year.
"I am gradually increasing the positions on small and
mid-caps," Sakuma said.
The broader Topix index was down 0.4 percent to
Fanuc Corp was the third-most heavily traded stock,
down 2.9 percent after UBS downgraded the industrial robot maker
to "sell" from "neutral", citing the risk of a slowdown in
global manufacturing purchasing managers' indexes.
Trading volume on the main board fell, with 1.89 billion
shares changing hands, down from 2 billion on Thursday.
"European Union discussions on the scale of the ESM
(European Stability Mechanism), the Spanish government's 2012
budget plan and the China PMI figure ... ahead of this, as well
as all the U.S. data, the market is cautious," said Fumiyuki
Nakanishi, general manager of investment and research at SMBC
"But overall sentiment remains strong and it doesn't look
like the Nikkei will break below 10,000," he said.
Ryota Sakagami, chief strategist of equity research at SMBC
Nikko Securities, said the market had been overheated on
optimism over the U.S. economic recovery and the market's main
focus will be whether factory activity and consumer sentiment
data bolster the bullish outlook or undermine the recent rally.
"I do think there is a strong possibility that the U.S. data
released next week will spur a market correction," he said.
The benchmark's 14-day relative strength index was at 62.2,
below the 70 threshold that signals that it is "overbought",
after remaining in overheated territory for most of March.
Exporters fell on the firmer yen, with the dollar at 81.937
yen after falling to a three-week low of 81.83 yen.
Honda Motor Co Ltd dropped 0.9 percent, Canon Inc
lost 1 percent and Sony Corp fell 2.4 percent.
Naomi Fink, Japan equity strategist at Jefferies Japan, said
the yen's recent steadying was "healthy" and said investors
shouldn't sell Japan.
"As market momentum slows we shift focus to relative value
among cyclicals -- we reiterate positives for electrical parts
and components over chemicals, given the former has shown
clearer signals of inventory clearance," Fink said in a report.
Japan's precision machinery subindex was flat and
electrical machinery sector eased 0.8 percent.
Reflecting the optimistic mood, the Nikkei volatility index
slipped 1.5 percent. The lower the volatility index, the
higher the risk appetite.
Citigroup said Japan's defensive stocks offered the best
shelter for global equity investors in a "risk-off" environment.
"Japanese health care, telecoms and utilities are all in the
five least risky major sectors globally," it said in a note.
"Japanese health care has outperformed during every risk-off
phase and underperformed during each risk-on phase since 2001."
"The low risk of Japanese sectors is of course supported by
the yen ... the yen tends to appreciate during risk-offs while
it usually depreciates during risk-ons."