TOKYO, Mar 3 (Reuters) The Nikkei average fell 1.55 per cent on Friday as stronger-than-expected consumer price data raised concerns about a rise in borrowing costs, sending down Mitsubishi Estate Co.
Ltd. and other property shares.
''The possibility that overnight rates may rise from zero is coming into sight and that has put a lid on the market,'' said Hiroichi Nishi, general manager of equity marketing at Nikko Cordial Securities Inc.
The selling spread to many sectors, with Toyota Motor Corp.
falling on the view that the yen may reverse a recent downtrend, which could curb growth in exporters' earnings.
Nishi said the strong consumer price index (CPI) data released before the start of trade increased the likelihood of the Bank of Japan ending its ultra-easy monetary policy, which would eventually lead to higher short-term interest rates.
''Investors are also debating which stocks to buy or sell under a credit tightening, with some saying banks may be good but companies with lots of debt may be bad, and so on,'' he added.
Katsuhiko Mori, senior portfolio manager at Daiwa SB Investments, agreed. ''It may be that investors are getting nervous as the market is at a big turning point,'' he said.
The benchmark Nikkei ended down 246.42 points at 15,663.34, its lowest closing since Feb. 20. On the week, the Nikkei fell 2.7 per cent. The broader TOPIX index was down 1.18 per cent on Friday at 1,612.96.
Japan's nationwide core CPI rose a greater-than-expected 0.5 per cent in January. The data had been eagerly awaited to help gauge the chances of a central bank policy shift. The BOJ policy board meets on March 8-9.
A Reuters survey showed that of 31 market participants polled, 15 said expect the central bank to vote in favour of ending its five-year-old quantitative easing policy of flooding the banking system with excess funds at its board meeting next week.
Property stocks were hard hit, as these firms have heavy lending requirements for developing properties. Mitsubishi Estate, Japan's second-largest property developer, tumbled 5.4 per cent to 2,355 yen and No.1 developer Mitsui Fudosan Co. Ltd.
fell 2.7 per cent to 2,390 yen.
Technology stocks also remained subdued due to worries about the direction of the currency markets.
The dollar fell to a low of 115.56 yen soon after the CPI data, but then pulled back up, gaining about 0.5 per cent on the day to around 116.40 yen on the view that the yen will remain a low-yielding currency for some time to come.
Electronics parts maker Kyocera Corp fell 2 per cent to 9,910 yen, and consumer electronics maker Sony Corp. declined 1.7 per cent to 5,280 yen.
But bargain-hunting propped up steel stocks as some thought the sector was oversold on Thursday.
Nippon Steel Corp. rose 0.9 per cent to 457 yen. The world's third-largest steel maker lost 4 per cent on Thursday even though it raised its already record profit estimate for the soon-ending business year by 1.9 per cent.
CHANCES TO BUY? Norihiro Fujito, a general manager in the investment research and information division at Mitsubishi UFJ Securities Co. Ltd., said the day's sellers were mainly domestic institutional investors who had been unloading stocks ahead of this month's book-closings.
Trust banks' selling amounted to a net 350 billion yen ($3.02 billion) in the third week of February, their highest ever weekly net selling, Fujito said. ''I think falls from here on should provide an opportunity to buy stocks and you should be able to expect a good return on a yearly basis.'' Mori of Daiwa SB Investments also expects the market to remain relatively flat this year, compared with a 40.2 per cent rise in the Nikkei last year, and said any big fluctuations in the market may offer trading opportunities.
''In order to differentiate from others, fund managers may have to take advantage of any sell-offs in the market to scoop up stocks and unload on rebounds,'' he said.
Trade volume fell to its second-lowest level this year, with just 1.73 billion shares changing hands on the Tokyo exchange's first section. Decliners outnumbered advancers by 1,269 to 345.
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