Nikkei sinks to four-week low, exporters hit by weak US data

Yen hits one-month high against the dollar after soft US manufacturing data suggested economy was losing some momentum

Japan's Nikkei average fell 1.1% to a nearly four-week low on Tuesday with exporters leading the decline after weak US factory data overnight stoked concern about growth prospects for the world's biggest economy.

Gains in real estate firms, however, helped pare back steep losses on expectations that the Bank of Japan will ease monetary conditions further at its policy meeting this week.

The Nikkei lost 131.59 points to 12,003.43, its lowest level since March 7, after falling as much as 2.7% during the session to below the 12,000-mark for the first time in three weeks. The benchmark shed 2.1% on Monday.

Shares of top exporters retreated as the yen hit a one-month high against the dollar after the soft US manufacturing data suggested the economy was losing some momentum at the end of the first quarter.

Canon Inc, Toyota Motor Corp, Honda Motor Co and TDK Corp were down between 2.6 and 3.4%.

"The honeymoon period is over," said Kyoya Okazawa, head of global equities and commodity derivatives at BNP Paribas.

"Investors are assuming that the more the market declines, the more the BOJ will become serious about easing monetary policy, so they are testing new governor Kuroda."

The BOJ, led by Haruhiko Kuroda, is expected to announce new monetary expansion measures after its two-day meeting ends on April 4.

Real estate and financial companies, which benefit from the Japanese government's drive to reflate the economy, were in demand.

Real estate investment fund Kenedix Inc jumped 14.7% and was the most-traded stock on the main board by turnover, while lenders Mitsubishi UFJ Financial Group, Mizuho Financial Group and Sumitomo Mitsui Financial Group gained between 1.6 and 2.3%.

"People were looking for excuse to take profits," a Tokyo-based sales trader said. "Everybody is saying if we are in a constructive bull market then you actually buy back on dips. That actually happened today."

Profit Taking

The benchmark Nikkei rallied 19.3% in January-March, its best quarterly performance in nearly four years, after Prime Minister Shinzo Abe embarked on expansionary fiscal and monetary policies to revive the economy.

The broader Topix index shed 0.9% to 991.34 on Tuesday, closing below the 1,000-mark for the first time in four weeks. The index sank 3.3% on Monday, its biggest one-day percentage fall in two years.

Trading volume on the Topix hit a two-week high, with 3.77 billion shares changing hands, compared with last month's daily average trading volume of 3.24 billion shares.

"The first-quarter performance was quite good, so investors want to take profit ... I am not worried about it too much," said Hisao Matsuura, an equity strategist at Nomura Securities.

He said he expected the Nikkei to test 13,000 by the end of June as the economy was likely to improve while the BOJ kept its stimulus tap open.

Other notable losers included Kubota Corp, down 3%, after Credit Suisse cut its rating on the agricultural equipment maker to 'underperform' from 'neutral'.