Japan’s Nikkei 225 Retreats Second Day on Overheating

Japanese shares fell a second day amid concern equities rose too fast after the Nikkei 225 Stock Average this week reached its highest since September 2008.

Japan Steel Works Ltd., which gets most of its revenue from making casting machinery, fell 4.6 percent after a three-day rally. Kansai Electric Power Co., Japan’s second-biggest utility by market cap, led a decline in the sector after Kyodo News said the government will push for conservation this summer. Nissan Motor Co., which counts North America as its No. 1 market, climbed 0.6 percent before U.S. data expected to show retail sales accelerated.

The Nikkei 225 fell 0.6 percent to 12,239.66 at the close in Tokyo after reaching a four-and-a-half year high on March 11. Volume on the gauge was 27 percent below the 30-day average. The Topix Index fell 0.4 percent to 1,031.42.

“We’re seeing a bit of consolidation in the market, rather than a correction, as investors take profit following some rapid gains,” said Soichiro Monji, chief strategist at Tokyo-based Daiwa SB Investments Ltd., which manages about 6 trillion yen ($62 billion). “We’re seeing a lot of better-than-expected data in the U.S., and it’s all pointing to a fundamental recovery.”

The Topix rallied 43 percent since elections were announced on Nov. 14 amid optimism a new government will do more to beat deflation. The gauge trades at 21.1 times estimated earnings, compared with 14 for the Standard & Poor’s 500 Index and 12.7 for the Stoxx Europe 600, according to data compiled by Bloomberg.

The Topix’s 14-day relative strength index, a gauge of market momentum, is above the 70 threshold that some traders view as a sign the market is overbought. Japan Steel Works slumped 4.6 percent to 515 yen to lead declines on the Nikkei 225 after rising the past three days.

U.S. Data

Futures on the S&P 500 Index climbed 0.1 percent. The U.S. equity gauge fell 0.2 percent yesterday, snapping a seven-day rally that drove the benchmark to within nine points of its record high. Data today is expected to show U.S. retail sales rose 0.5 percent in February as the job market strengthened.

In Japan, two opposition parties said they will endorse Kikuo Iwata for central bank deputy governor, reducing the risk that Prime Minister Shinzo Abe’s three central bank nominees will be rejected. The main opposition Democratic Party of Japan yesterday said it would vote against Iwata while supporting Abe nominees Haruhiko Kuroda for governor and Hiroshi Nakaso for deputy.

Japan Tobacco

Among stocks that rose, Japan Tobacco Inc. gained 7.2 percent to 3,205 yen, the biggest gain on the Nikkei 225. (NKY) Trading volume was more than four times the average for the shares over the past year as demand from investors is more than double the number of Japan Tobacco shares on offer by the government, a Ministry of Finance official said yesterday.

Nikon Corp. increased 3.2 percent to 2,118 yen, the biggest gain in eight weeks. The world’s second-biggest camera maker by sales rose on a Nikkei newspaper report that the company will trim its inventory of cameras by 20 percent by the end of March.

The Nikkei Stock Average Volatility Index (VNKY) fell 4.4 percent to 24.60 today, indicating traders expect a swing of about 7 percent on the benchmark gauge over the next 30 days. Trading volume for equity options in Japan yesterday reached its highest level since January 2011, according to the Tokyo Stock Exchange.

To contact the reporter on this story: Anna Kitanaka in Tokyo at akitanaka@bloomberg.net

To contact the editor responsible for this story: Nick Gentle at ngentle2@bloomberg.net

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