Nikkei 225 Retreats From 32-Month High Before BOJ Meeting

Japanese shares fell, with the Nikkei 225 Stock Average slipping from a 32-month high, as the yen climbed against the dollar after hitting its lowest level in 2 1/2 years before a Bank of Japan policy decision tomorrow.

Nissan Motor Co., which counts North America as its biggest market, lost 1.5 percent. Fanuc Corp. slid 3.9 percent after the factory robotics company’s rating was cut at Citigroup Inc. Sharp Corp. lost 3.8 percent on a Reuters report it slowed production of displays for Apple Inc.’s iPad. Sony Corp. gained 3.3 percent on a report the electronic makers may release the thinnest tablet computer ever.

The Nikkei 225 lost 1.5 percent to finish at 10,747.74 in Tokyo after closing at its highest since April 2010 on Jan. 18. The Topix Index sank 0.7 percent to 905.16. The measure has risen 25 percent since elections were announced on Nov. 14 on optimism the new government led by Prime Minister Shinzo Abe will increase pressure on Japan’s central bank to do more to stimulate the economy.

“Expectations for the Bank of Japan and its easing measures have been priced into stocks,” said Ayako Sera, a market strategist at Sumitomo Mitsui Trust Bank Ltd. in Tokyo, which oversees 33 trillion yen ($367 billion). “The speed at which Japanese shares rose was very fast, so we’re seeing some adjustments as the yen also corrects.”

Japan’s government is trying to shake off entrenched deflation and drive a recovery in the world’s third-biggest economy, with Abe pressing the central bank to double its inflation target to 2 percent. All 23 economists in a Bloomberg News survey expect the BOJ to expand asset purchases at a two-day meeting that starts today, with a median estimate for a 10 trillion yen ($111 billion) increase. The Cabinet announced a 10.3 trillion yen stimulus package on Jan. 11.

Exporters Slide

Electronics and car manufacturers were among the biggest drags on the Topix after the yen rose to 89.54 against the dollar after touching 90.25, the weakest since June 2010.

Nissan sank 1.5 percent to 865 yen. Canon Inc., the world’s biggest camera maker, dropped 0.6 percent to 3,330 yen.

“Stocks and currency investors are keeping a very close eye on each other,” Sumitomo Mitsui’s Sera said. “Investors now want to confirm some of the expectations they have for the Bank of Japan.”

Fanuc sank 3.9 percent to 14,350 yen, the second-biggest drag on the Nikkei 225. The factory-automation maker was cut to neutral by Citigroup, which cited potential for missed earnings estimates and depressed Japanese demand.

Sharp dropped 3.8 percent to 331 yen, its biggest drop since Jan. 7. The company slowed a Japanese production line making screens for iPads to a minimum as Apple manages inventory, according to a Reuters report.

JGC Falls

JGC Corp., which constructs plants globally, declined 2.7 percent to 2,562. Seven of 17 JGC employees were safe after a four-day standoff between terrorists in Algeria, Chief Cabinet Secretary Yoshihide Suga said. He told reporters he couldn’t confirm media reports that nine had been killed.

Among stocks that rose, Sony gained 3.3 percent to 1,187 yen, reaching its highest since May 10. The electronics maker’s Xperia Tablet Z may be thinnest-ever mainstream tablet to date, website VentureBeat reported, without citing anyone.

Mitsubishi Corp., Japan’s biggest trading house by market value, gained 0.6 percent to 1,825 yen after it offered to buy out meat producer Yonekyu Corp. as it seeks to bolster income from businesses outside raw materials. Yonekyu surged 20 percent to 893 yen.

The Topix is trading at 1.07 times book value, compared with 2.04 for the Standard & Poor’s 500 Index and 1.47 for the Stoxx Europe 600 Index.

Volume on the measure was about 5 percent above its 30-day average. The Nikkei Stock Average Volatility Index rose 1 percent to 24.13, indicating traders expect a swing of about 6.9 percent on the benchmark gauge over the next 30 days.