Nikkei slips from 15-year high after Fed spurs profit-taking

Japanese share prices slipped from 15-year highs on Thursday, as investors took profits on recent gainers such as financial shares, which could suffer from a fall in Japanese bond yields.

The Nikkei share average fell 0.7 per cent to 19,418.38, after briefly hitting a 15-year intra-day high of 19,557.17 in early trade.

Yields on Japanese government bonds fell after the US Federal Reserve struck a more dovish tone on interest rates and gave a more cautious view of the world’s largest economy.

Investors locked in on gains, with the market having risen more than eight percent in the past month on a variety of reasons, including expectations of more buying by Japanese public investors to hopes for earnings growth and corporate governance reforms.

“The rally has been very rapid and it will be hard to bid it up further. Japanese investors will probably take profits ahead of the end financial year (on March 31,)’’ said Hiroshi Ono, the head of equity investment at Sumitomo Life Insurance.

Financial shares led the decline after Japanese bond yields fell.

Low interest rates tend to squeeze bank revenues. Bank shares fell 1.9 per cent, with Mitsubishi UFJ Financial Group slipping 2.2 per cent and Sumitomo Mitsui Financial Group dropping 1.7 per cent.

Insurers also fell 1.9 per cent, with Dai-ichi Life falling 2.3 per cent and T&D Holdings 2.7 per cent.

The yen’s one percent gain against the dollar following the Fed’s policy meeting was also cited as a possible trigger for profit-taking, though shares of exporters were not particularly weak.

Toyota Motor rose 0.2 per cent, outperforming the overall market, while Nissan Motor was down 1.2 per cent.

Bucking the trend, shares in Nintendo and DeNA extended their big gains for a second day after the companies announced a tie-up.

Nintendo rose 11 percent after hitting limit-up on Wednesday, while DeNA was untraded with a glut of buy orders at the day’s limit for two days in a row.

Some market players said hopes that Japanese companies would step up efforts to boost profits and shareholder returns were sustaining strong foreign investor appetite for Japanese stocks.

Fanuc gained 1.1 per cent, hitting another record high, extending gains since a surprise change in policy to limit its engagement with shareholders reported last Friday to more than 17 per cent.

“It was an extremely well-held view that Fanuc would never change. That myth was busted. It was an extremely well-held view that Nintendo would never change. And that myth also was busted,’’ said Stefan Worrall, director of cash equities at Credit Suisse.

“So for foreign investors, their traditionally held views, with regards to Nintendo and Fanuc, have been turned upside-down,’’ he said.

The broader Topix fell 0.5 per cent and the JPX-Nikkei Index 400 dropped 0.6 per cent.