Japan stocks edge lower

2011-03-24 08:38

Tokyo - Japanese shares slipped on Thursday, with a sell-off in Tokyo Electric Power Co and financial firms weighing on the broader Topix index as radiation leaks from a quake-stricken nuclear plant stifled any optimism on the economy.

The benchmark Nikkei average fell 0.2%, or 14.46 points, to 9 435.01. The broader Topix shed 0.8% to 853.95.

While the near-term market outlook is seen depending on whether Japan can safely stabilize the crippled plant, in the longer run, the market could fall under the weight of the damage from a massive earthquake this month and likely power shortages.

"The damage from the earthquake and the power plant saga have only begun to unfold now. The market is likely to test the downside in the next six months," said Daisuke Uno, chief strategist at Sumitomo Mitsui Banking Corp.

"The lows hit right after the earthquakes - around 8 200 in the Nikkei and 7 800 in Nikkei futures - would be a good target," Uno added.

Earlier in the week, the Nikkei briefly rose above 9 559.62, a 50% retracement of its fall from a February 17 peak to a two-year intraday low hit last week, but many market players saw little reason to push Nikkei beyond that level.

"The market has risen only because it was oversold last week, not because of any improvements in market factors. It's just in line with market theory," said Takashi Hiroki, chief strategist at Monex Securities.

"We are unlikely to see further gains in the near future, unless there's an end to the nuclear crisis in sight."

One trader said foreign players were selling a basket of stocks.

Nearly two weeks after the earthquake and tsunami that battered the Fukushima nuclear complex and devastated northeast Japan, Japan is grappling with threats from radiation leaks as Tokyo's 13 million people were told not to give infants tap water.

"The impact of the quake has already been priced in, but the extent to which power cuts will affect companies is completely unpredictable and may be prolonged, weighing heavily on the whole market," said Makoto Kikuchi, CEO at Myojo Asset Management Japan.