Japan's Nikkei stock average retreated from a six-month high in choppy trade on Thursday, but sentiment remained upbeat on the back of easing steps from the Bank of Japan that have weakened the yen. After making sharp gains this week, some market participants even said the Nikkei could test 10,000 in the next few weeks if trading volume continues to grow, although they cautioned it was likely to be a slow and steady climb.
"The fact that autos and financials haven't seen any major adjustment after big gains is an indication of the strength of current market sentiment," said Yumi Nishimura, senior technical analyst at Daiwa Securities. Some blue chip exporters fell as investors took profits after a strong rally the previous day. Nissan Motor Co lost 1.3 percent, while Mitsubishi UFJ Financial Group shed 1.7 percent and Sumitomo Mitsui Financial Group dropped 1.3 percent.
The benchmark Nikkei closed down 0.2 percent at 9,238.10, with the cash market largely shrugging off signs that a second bailout for Greece may be delayed. The Nikkei volatility index surged 6.7 percent, as investors bought protection against a sharp pull back. The broader Topix slipped 0.3 percent to 800.25. Nearly 2.5 billion shares changed hands, down from a six-month high of 2.91 billion shares the previous session.
Some laggard stocks rose. Nintendo, which shed more than half of it value last year, advanced 1.3 percent. Tokyo Electric Power Co (Tepco) surged 3.8 percent after the Asahi newspaper said Japan's ruling Democratic Party was in discussions in favour of restarting nuclear plants that had been shuttered after last year's March earthquake.
The Nikkei is up 9.3 percent so far this year, supported by the return of foreign investors, who were net buyers of Japanese stocks for the seventh straight week through February 11. That compares with a 6.8 percent rise for the US S&P 500 and a 7.4 percent gain for Europe's FTSEurofirst 300. Goldman Sachs wrote in their portfolio strategy note on Wednesday that Japanese equities were finally catching up to the global rally and said it had now expanded its cyclical recommendation to banks, insurance and real estate.
Goldman lifted its six-month Topix target by 24 percent to 900 from 725, representing an upside of 12.5 percent from Thursday's close. Nomura was also bullish, saying that continued buying of high-beta stocks will support automakers, machinery, financials and trading sectors. But Nomura expected the Nikkei to consolidate at the 9,000-9,300 level for now before attempting to head to 10,000 - a level not seen since August 1 - in late February or early March.