January 24, 2017 / 2:43 AM / 3 years ago

Nikkei falls on strong yen; Trump's protectionism weighs

* Banks lower on falling U.S. yields

* Report on Mnuchin’s comment on dollar weighs on market - analyst

* Electronic parts makers rise on strong earnings expectations

By Ayai Tomisawa

TOKYO, Jan 24 (Reuters) - Japan’s Nikkei share average fell on Tuesday morning after the dollar weakened to a seven-week low against the yen overnight, while concerns about the impact of U.S. President Donald Trump’s protectionist views continued to weigh on sentiment.

The Nikkei dropped 0.1 percent to 18,877.71 at the midday break, after dropping 1.3 percent on the previous day.

While Trump promised “massive” cuts in taxes and regulations on Monday, he also formally withdrew from the Trans-Pacific Partnership (TPP) trade deal and talked of big border taxes.

Automakers were battered in particular, hit both by a strong yen and negative sentiment after the Nikkei reported that Trump said that Japan was engaging in unfair practices on auto imports and exports.

Toyota Motor Corp fell 1.0 percent, Honda Motor Co shed 1.6 percent and Nissan Motor Co declined 1.3 percent.

“Right now, the main concern is America’s protectionist trade stance,” said Nobuhiko Kuramochi, a strategist at Mizuho Securities.

The dollar was up 0.2 percent at 112.92 yen but notched a low of 112.52 earlier in the session, its weakest since Nov. 30, and well below its overnight high of 114.45.

Banks were battered by falling U.S. yields. The benchmark 10-year yield posted its biggest one-day drop in more than two weeks as concerns about the fallout of Trump’s tough stance on trade spurred safe-haven demand for bonds.

Mitsubishi UFJ Financial Group dropped 2.9 percent and Sumitomo Mitsui Financial Group shed 2.3 percent.

Traders said that while Japanese stocks were pressured by a strong yen, some investors find buying opportunities in companies with strong earnings expectations.

Norihiro Fujito, a senior investment strategist at Mitsubishi UFJ Morgan Stanley Securities, said that hedge funds had sold the dollar and bought the yen earlier after Bloomberg reported that Trump’s nominee for Treasury Secretary Steven Mnuchin was quoted as saying that an excessively strong dollar was negative in the short term.

“The Japanese market started on a weak note but clearly some investors are trading on fundamentals,” Fujito said.

The Nikkei reported that total orders for six major Japanese electronic parts makers rose about 3 percent on the year to around 1.42 trillion yen in the October-December period, the first gain in five quarters.

Murata Manufacturing rose 0.8 percent, TDK Corp added 0.7 percent, Kyocera Corp advanced 0.6 percent, Nidec Corp soared 1.8 percent, Alps Electric surged 2.9 percent and Nitto Denko gained 1.5 percent.

The broader Topix shed 0.3 percent to 1,510.40 and the JPX-Nikkei Index 400 declined 0.3 percent to 13,532.89. (Editing by Simon Cameron-Moore)

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