December 19, 2012 / 11:15 PM / in 5 years

Nikkei set to slip after sharp rally, focus on BOJ

TOKYO, Dec 20 (Reuters) - Japan's Nikkei share average is
expected to open lower on Thursday, ahead of the Bank of Japan's
policy meeting, after a sharp rally in the previous session that
took the index to end above 10,000 for the first time since
    The Bank of Japan is expected to deliver its third dose of
monetary stimulus in four months in a prelude to more aggressive
action next year, as it faces intensifying pressure from the
country's incoming leader for stronger efforts to beat
    The Nikkei is likely to trade between 10,000 and
10,200, strategists said, while Nikkei futures in Chicago closed at 10,140 on Wednesday, down 0.4 percent from
the Osaka close of 10,180.
    "Nikkei futures held up on the CME, so stocks could build on
gains, but after yesterday's surge, at least some selling is
likely to emerge," said Kenichi Hirano, operating officer at
Tachibana Securities.
    "The Bank of Japan's meeting is the main focus today, but
the outcome is already likely priced in to positions, so it
could be a neutral factor, or even a negative factor if they
take easing steps that disappoint."
    On Wednesday, the Nikkei jumped 2.4 percent to 10,160.40 to
an 8-1/2-month high, logging its biggest one-day percentage rise
since September 2011, while the broader Topix index
surged 2.8 percent to 839.34 in heavy trading volume not seen
since March 2011.
    Shinzo Abe, whose opposition Liberal Democratic Party won
Sunday's election by a landslide, has called for the BOJ to
adopt bolder policy action, including embarking on "unlimited
easing" and setting an inflation target of 2 percent. His
comments have softened the yen.
    Driven by the yen weakness, the Nikkei has rallied 17.3
percent over the past five weeks, taking the year-to-date gain
for the Nikkei to 20.2 percent, outperforming a 14.2 percent
rise in the U.S. S&P 500 and a 15.2 percent gain in the
pan-European STOXX Europe 600.
    Still, Japanese equities are much cheaper than their U.S.
counterparts, with a 12-month forward price-to-earnings ratio of
12.1 versus S&P 500's 12.7, data from Thomson Reuters Datastream
showed. The STOXX Europe 600 carries a 12-month forward P/E of
> Wall St falls as 'cliff' talks sour, but hopes remain     
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> Treasuries rally as higher yields lure buyers            
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> Oil rises on U.S. budget deal hopes, demand optimism     
    Mitsubishi Electric will likely have to pay about 50 billion
yen ($593 million) in fines to the Japanese defense ministry for
overcharging for defense equipment, the Nikkei business daily
    Mitsubishi Motors will recall about 1.2 million 660 cc
minicar vehicles sold in Japan due to faulty engine oil seals, a
part that prevents engine oil from leaking, the Japanese
automaker said on Wednesday.
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