TOKYO, April 9 (Reuters) - Japan's Nikkei average ended flat
on Tuesday after rising to its highest level in nearly five
years, as investors cashed in gains on stocks that had stellar
performances after the central bank unveiled massive stimulus
moves last week to revive the economy.
Japanese government debt prices eased, with longer
maturities underperforming ahead of a 30-year sale later this
week, even though the Bank of Japan lost no time in kickstarting
the sweeping changes.
"There is some profit-taking after some of the big moves
yesterday... Small real estate stocks are still getting up
there," said a senior equity trader at a foreign brokerage in
Tokyo. "It's still a quantitative easing market."
The real estate sector, which is seen as the
biggest beneficiary of Japan's push to reflate the economy, sank
4.1 percent after rallying more than 26 percent during the
previous three sessions.
Within the sector, real estate investment fund Kenedix Inc
added 2.8 percent and was the most-traded stock on the
main board by turnover.
The Nikkei was flat at 13,192.35 after trading as
high as 13,331.39, its highest level since August 2008.
Financial firms, another sector expected to do well due to
easing, also succumbed to profit-taking.
Lender Mitsubishi UFJ Financial Group dropped 2.5
percent, consumer financing firm Aiful Corp eased 0.2
percent and Nomura Holdings, Japan's top brokerage,
slipped 0.3 percent. They were the second to fourth-most traded
On April 4, the Bank of Japan promised to inject $1.4
trillion into the world's third-largest economy in less than two
years by buying government bonds across the yield curve as well
as riskier exchange-traded funds.
The BOJ on Monday launched its campaign by offering to buy 1
trillion yen ($10.3 billion) of JGBs with maturities of between
five and 10 years, and 200 billion yen of bonds with maturities
exceeding 10 years.
The extraordinary measures, aimed at ending nearly two
decades of deflation and economic malaise, have triggered a wave
of buying in Japanese equities.
The benchmark Nikkei has surged more than 52 percent since
mid-November, when Shinzo Abe promised expansionist fiscal and
monetary policies, dubbed "Abenomics", to revive Japan's economy
during his election campaign. He was elected prime minister the
Japanese government bond prices were weaker on Tuesday. The
10-year yield inched down 1 basis point to 0.530
percent, well above a record low of 0.315 percent hit the day
after the BOJ's policy announcement.
But 10-year JGB futures ended the day 0.33 point
higher at 144.67, below their record high of 146.41 marked on
Friday but also well off a 10-month low of 143.10 hit during
that volatile session.
Longer maturities underperformed, with some investors eyeing
Thursday's 30-year auction as the first test of real demand in
the new market order forged by the central bank's radical
"We are still getting used to a market in which the central
bank is the main player, so it's hard to predict how the auction
will go," said a fixed-income fund manager at a Japanese trust
The 20-year yield added 6.5 basis points to
1.290 percent and the 30-year yield rose 7 basis
points to 1.380 percent, although they were still below the
level they were trading a day before the BOJ announcement.
Royal Bank of Scotland recommended investors buy the 30-year
debt when the yield rose above 1.40 percent.
"We view the 1.2 percent range as a fair level for the
30-year while the BOJ maintains the current policy of buying 800
billion yen from the 10-year-plus sector per month," it said.
"We expect the period of trading in a broad range of 0.95 to
1.45 percent with this level as the median lasting through
October, when investors begin factoring in an end to these
MUCH IN PRICE?
Andrew Pease, chief investment strategist for Asia-Pacific
at Russell Investments, said the stock market had already priced
in a strong rise in company earnings this year.
"If you look at the price-to-book value, which is still
below 1.5 times, you know Japan still has got some long-term
value," Pease said.
"It's still probably OK, particularly to the extent that you
know they are going to push the yen down. But most of the
reflation rally, I would say, already happened."
Some exporters were buoyed by a softer yen, which
fell as much as 0.3 percent on Tuesday to 99.67 to the dollar,
its lowest level since May 2009.
Canon Inc, TDK Corp, Suzuki Motor Corp
and camera-to-endoscope maker Olympus Corp
rose between 2.1 and 4.3 percent.
Societe Generale highlighted a number of exporters, which it
said are "super sensitive" to yen depreciation, including office
equipment maker Ricoh Co Ltd, Olympus, heavy machine
maker Mitsubishi Heavy Industries Ltd, Honda Motor Co