Monday, January 28 07:21:49
Japan's Nikkei share average dropped today as investors took profit on exporters as they awaited further cues from corporate earnings after the index briefly pierced a fresh 32-month high above 11,000 in early trade.
The Nikkei fell 0.9 percent to 10,824.31 after initially leaping to 11,002.86 as interest in Japanese exporters was fanned as the yen dropped to 91 versus the dollar, promising higher overseas revenues once they are repatriated.
The Nikkei has gained about 25 percent since mid-November on hopes that Japan's new prime minister, Shinzo Abe, will pursue aggressive policies to beat the country's prolonged deflation, including pressuring the central bank for further monetary easing.
Analysts said sharp rallies in the Japanese market are merely backed by expectations, and companies have yet to prove that their fundamentals have recovered, thus the market is prone to a correction.
"We haven't seen the numbers yet. The market is seen having reached its upside as it is running ahead of the reality... investors at domestic institutions remain cool about companies' fundamentals," said Yutaka Yoshino, chief technical analyst at SMBC Nikko Securities.
But Yoshino said that the Japanese market is expected to rise further in the long term if the current weak yen trend continues.
"The recent rally is just the start of a long-term rise. The market has yet to recover from its pre-Lehman levels (of above 12,000)," Yoshino said. ( C) Reuters