Nikkei index records its first weekly loss in 6 weeks due to profit taking

Japan’s Nikkei index closed higher today, Friday, but ended the week lower for the first time in 6 weeks due to profit-taking operations, while increased bets on the Bank of Japan’s shift away from ultra-easy monetary policy this month affected morale.

According to Reuters, the Nikkei index ended the session up 0.2% to 39,688.94 points, down from the highest level during the day of 39,989.33 points.

The index ended the week down 0.6%, after 5 weekly gains in a row, when the index jumped beyond its record high level recorded in 1989, supported by government reforms for companies and strong foreign inflows.

Momentum slowed after the index surpassed 40,000 points for the first time ever on Monday, amid profit-taking and the yen rose on speculation that the Bank of Japan may normalize monetary policy at its meeting on March 18-19.

The automobile sector recorded a decline on Friday due to the strength of the yen, as Toyota Motor stock, which is heavy on the index, lost 1.4%, Subaru stock fell 3.2%, and Suzuki Motor stock fell 2.1%. The Japanese currency rose 1.5% during the week, recording its largest rise this year against the dollar.

Naka Matsuzawa, chief strategist at Nomura, said traders are making some corrections in export stocks as they prepare for the Bank of Japan meeting.

“Investors do not know the size of the recovery (in the yen) that will come after the policy change, so they are not staying away,” he added.

A weak yen makes Japanese exports more competitive and enhances the value of foreign revenues.

At the same time, the banking sector rose 2.1%. The sub-index recorded its best weekly jump since September, reaching 6%, with increasing bets on an imminent exit from the Bank of Japan’s ultra-loose policy.

Technology-heavy stocks closed lower, after rising in the morning session. Shares of giant chip-making equipment company Tokyo Electron rose only 0.8%, while shares of Advantest, a chip-testing equipment maker, fell 0.6%.