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Japan’s Nikkei drops from one-month high as yen strength hurts exporters

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TOKYO — Japan’s Nikkei share average dropped on Thursday – retreating from a one-month high – as the effects of the Bank of Japan’s (BOJ) decision not to back away from stimulus faded, with a resurgent yen weighing on automakers in particular.

The Nikkei ended the morning session down 1.2% at 26,468.62, retracing about half of Wednesday’s 2.5% rally, when the central bank defied bond market pressure and kept policy settings unchanged.

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Japan’s equity benchmark hit a high of 26,816.68 on Wednesday, a level not seen since Dec. 20, when the BOJ shocked markets by loosening yield curve controls. Investors had interpreted it as a sign that an exit from decades-old stimulus was coming sooner rather than later.

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The broader Topix fell 0.76% to 1,920.22 on Thursday, also giving back approximately half of the previous day’s 1.68% rally.

The yen strengthened about 0.26% to 128.60 per dollar , extending its rebound from Wednesday’s knee-jerk low of 131.58 and heading back towards Monday’s seven-month peak at 127.215.

“There will be uncertainty over the monetary policy until we see the government’s nominee for the next BOJ governor,” said Yunosuke Ikeda, chief equity strategist at Nomura.

Current governor Haruhiko Kuroda retires in early April after 10 years at the helm. The government is likely to present its nominee on Feb. 10.

The strong yen of the past several months will also weigh in earnings announcements as the reporting season gets going towards the end of next week, increasing downside risks for stocks, Ikeda added.

Mitsubishi Motors was the Nikkei’s biggest percentage decliner, plunging 5.67%. Toyota dropped 2.44% and Nissan slumped 3.24%.

Startup investor SoftBank Group was another standout decliner, tumbling 3.43%.

Uniqlo store operator Fast Retailing was the biggest drag, shaving 46 points from the Nikkei with a 1.76% decline.

Bucking the trend, department store operators surged amid renewed hopes for a tourism rebound as COVID curbs ease. J. Front Retailing was the Nikkei’s top performer, jumping 3.57%. (Reporting by Kevin Buckland; Editing by Janane Venkatraman)

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