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UPDATE1: Nikkei drops to near 1-month low after Tankan business sentiment data.

TOKYO, Oct. 1 Kyodo


The key Nikkei stock average slid to its lowest close in nearly a month on Monday as investors confirmed that business sentiment in Japan remains weak after the release of the Bank of Japan's closely watched Tankan survey.

The 225-issue Nikkei Stock Average closed down 73.65 points, or 0.83 percent, at 8,796.51, the first time since Sept. 6 that it has ended below 8,800. The broader Topix index of all First Section issues on the Tokyo Stock Exchange lost 5.07 points, or 0.69 percent, to 732.35.

Rubber products makers, textile makers and real estate developers suffered the biggest losses, while a handful of gainers included utility suppliers, mining firms and oil distributors.

The results of the BOJ's quarterly survey, released shortly before the start of stock trading, were largely in line with market expectations, with the diffusion index for large manufacturers in September coming to minus 3, compared with the average forecast by economists of minus 4 in a Kyodo News poll.

But many investors took it negatively due to the timing of the survey.

The central bank received most of the responses to the survey before anti-Japan riots erupted across China in mid-September.

"The latest Tankan survey doesn't fully reflect the negative effects of strained Japan-China ties on Japanese businesses, so the results would have been even worse," said Toshikazu Horiuchi, equity strategist at IwaiCosmo Securities Co.

Business confidence among large Japanese manufacturers deteriorated for the first time in three quarters, affected by a slowdown in other economies such as Europe and China.

Horiuchi also pointed out the average exchange rate the companies assumed for fiscal 2012 in the Tankan survey was 79.06 yen, saying, "The yen is stronger than that now. Those factors pushed the market lower."

Also weighing on the market were a fall in U.S. and European stocks late last week, the yen's rise against the euro and growing concerns over a slowdown in the world economy, brokers said.

The Tokyo market showed a limited reaction to China's official factory Purchasing Managers' Index for September that was in line with market expectations at 49.8. A PMI reading below 50 suggests contraction, while a number above 50 points to expansion.

"Market players continue to look for fresh buying incentives," said Hiroichi Nishi, assistant general manager of SMBC Nikko Securities Inc.'s equity research division.

Asked if the day's Cabinet reshuffle by Prime Minister Yoshihiko Noda affected stock movements, Nishi said, "Not really. It seems market attention has been shifted to what the (main opposition) Liberal Democratic Party does from what the Democratic Party of Japan does."

On the First Section, declining issues outnumbered advancing issues 1,109 to 419, while 142 remained unchanged.

Carmakers, which showed a bleak outlook in the Tankan survey, succumbed to broad-based selling. Toyota fell 51 yen, or 1.7 percent, to 2,989 yen, and Nissan was down 10 yen, or 1.5 percent, to 655 yen.

But Suzuki Motor rose 52 yen, or 3.4 percent, to 1,567 yen. The Nikkei business daily said Saturday that Italy's Fiat SpA is considering strengthening ties with the Japanese company to outperform German rival Volkswagen AG.

Chemical maker Nippon Shokubai plunged 116 yen, or 13.3 percent, to 757 yen after Saturday's explosion and fire at its plant in Himeji, western Japan, killed a firefighter and injured 35 other people.

Trading volume shrank to 1,373.93 million shares compared to Friday's 1,756.70 million shares.
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Publication:Japan Weekly Monitor
Geographic Code:9JAPA
Date:Oct 1, 2012
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