The Nikkei 225 index was subjected to profit taking on Friday with the Kyushu earthquake having an adverse impact in initial dealings, although favourable global fundamental developments limited selling and allowed robust gains of close to 8.0% for the week as a whole.
US economic data helped underpin risk conditions with lower than expected jobless claims at the lowest level for over 40 years, while a slightly lower than expected reading for consumer prices, allied with dovish comments from Atlanta Fed President Lockhart, reinforced expectations of a generally dovish Federal Reserve policy.
US equity markets, however, ran into profit taking, struggling to extend gains from fresh 2016 highs. Tokyo markets were also vulnerable to profit taking after strong gains with investors also taking a slightly more cautious stance given uncertainties surrounding the global outlook.
Chinese first-quarter GDP data was in line with expectations at 6.7% from 6.8% previously, but other data was generally stronger than expected. Industrial production rose 6.8% over the year from 5.4% previously and an expected 5.9% with a slight beat on retail sales.
Fixed asset investment and money supply was also slightly stronger than expected. The figure on new loans was much stronger than expected with a figure of CNY1.37trn from CNY0.727trn previously, reinforcing the that the PBOC is promoting an expansionary policy with overall social financing at CNY2.34trn.
Currency moves were benign as the yen held a slightly weaker tone with USD/JPY holding above the 109.00 area, although there was no move to challenge the 110.00 area.
Sources suggested that the Bank of Japan could increase the purchase of exchange-traded funds to boost monetary policy. Finance Minister Aso reiterated strong concerns over one-sided currency moves and that the G20 agreement would not prevent Japan from intervening.
Prices were marked lower at the open, partly in response to a strong earthquake in south-western island of Kyushu, before rallying to probe positive territory during the morning session. Profit taking remained a nagging influence throughout the day and the index was trapped slightly in slight narrow territory during the afternoon session with further resistance on approach to the 17,000 level.
There was a closing loss of 63.02 points and 0.37% at 16,848.03. The wider Topix index closed 9.95 points and 0.73% lower at 1,361.40 higher at 1,371.35.
Weekend discussions at the Washington IMF meetings will be monitored closely with a particular focus on comments from Federal Reserve and Bank of Japan officials. Sunday’s Doha oil meeting will also have a potentially important impact on Monday’s trading.