* MSCI Asia ex-Japan retreats from fresh 17-1/2-month high
* Nikkei in third daily drop as yen firms despite BOJ steps
* Focus turns to earnings season
* European shares likely to rise
By Chikako Mogi
TOKYO, Jan 23 (Reuters) - Asian shares retreated from
multi-month highs on Wednesday amid caution as the earnings
season gathers pace, with Tokyo stocks falling to three-week
closing lows in response to a firm yen.
"Asian markets have been climbing steadily and it's natural
for investors to want to book profits as the region's earnings
season begins in full force later this month," said Hirokazu
Yuihama, a senior strategist at Daiwa Securities in Tokyo.
"The uptrend remains intact given improving fundamentals
globally, so selling like this is a healthy correction that may
lead to putting a solid floor to prices," he said.
The MSCI's broadest index of Asia-Pacific shares outside
Japan fell 0.3 percent after earlier reaching a
17-1/2-month high. The index has risen nearly 30 percent since a
low touched in June, 2012.
The yen held firm against the dollar and the euro as
monetary easing announced on Tuesday by the Bank of Japan failed
to provide an immediate stimulus as some had hoped, though many
analysts acknowledged the BOJ's resolve to tackle Japan's
stubborn deflation and economic stagnation.
The stronger yen hurt Japanese exporters, dragging the
benchmark Nikkei average down 2.1 percent to a
three-week closing low. The yen has weakened by around 12
percent since mid-November against the dollar, and boosted the
Nikkei by more than 20 percent as a weaker yen improved
exporters' earnings outlook.
The BOJ on Tuesday doubled its inflation target to 2 percent
and adopted an open-ended commitment to buy assets starting
2014, sparking an unwinding of yen short positions from
speculators looking for more immediate easing step.
The dollar fell 0.6 percent to 88.20 yen while the
euro slid 0.7 percent to 117.45 yen. The dollar hit a
2-1/2-year high of 90.25 yen on Monday.
Many still believe the yen will resume its recent downtrend,
seeing the latest rebound in the Japanese currency as a
correction to its rapid and sharp decline.
With the BOJ joining the continued push by global central
banks to support growth, Morgan Stanley said in a research note
that policy easing by central banks was positive for emerging
markets, with more bond portfolio inflows increasingly towards
"Our key themes for 2013 are rebalancing and reflation, with
both prevalent so far this year. Even given a migration towards
global equities and away from fixed income, emerging market
fixed income remains well-placed," it said.
Elsewhere, Hong Kong and Chinese shares were among the
hardest hit as investors took profits from recent gains, with
indexes faltering at technical resistances. Hong Kong
shares slipped from a 19-1/2-month high and were down 0.4
percent while Shanghai shares fell 0.5 percent, moving
further away from a 7-1/2 month high.
"We have risen by quite a bit in a very short time, so
investors have been taking some profit in the last week or so,
looking for new ideas to rotate into," said Larry Jiang, chief
strategist at Guotai Junan International Securities.
Australian shares bucked the trend to edge up 0.2
percent to their highest close in almost 21 months after miner
BHP Billiton gained after reporting a rise in quarterly
iron ore production.
European markets are seen rising, with financial
spread-betters predicting London's FTSE 100, Paris's
CAC-40 and Frankfurt's DAX would open as much
as 0.4 percent higher. U.S. stock futures were down 0.2
percent, pointing to a softer Wall Street start.
On Tuesday, hopes of an improvement in the global economy
led the Standard & Poor's 500 Index to a five-year high.
Investors were also cheered by easing worries over the U.S.
Republican leaders in the House of Representatives said they
aim to pass on Wednesday a nearly four-month extension of the
U.S. debt limit to May 19.
U.S. crude was down 0.1 percent to $96.59 a barrel
and Brent eased 0.2 percent to $112.23.
Spot gold was at $1,692.66 an ounce, near Tuesday's
one-month high of $1,695.76, while London copper traded
down 0.3 percent at $8,107 a tonne but clinging near a one-week
high of $$8,144.50 hit on Tuesday.