Bernanke’s confirmation that the Fed is getting closer to
rolling back on its monthly $85 billion asset purchases sent
benchmark 10-year U.S. Treasury yields to a 15-month
high and weighed on equities.

The 10-year JGB yield added 2.5 basis points
to 0.835 percent after trading as high as 0.850 percent, still
within the range of 0.800 to 0.900 percent the benchmark bond
has been trading over the past three weeks.

However, it was a far cry from a record low of 0.315 percent
reached the day after the Bank of Japan announced its plan on
April 4 to inject $1.4 trillion into the economy in less than
two years by buying JGBs across the yield curve to pull the
country out of deflation.

“Treasury yield rises have put upward pressure on JGB yields
but at the same time the BOJ has changed its operations in the
last two months and as a result volatility has come down
gradually,” said Tomohisa Fujiki, interest rate strategist at
BNP Paribas in Tokyo.

“So it’s not like a huge selloff in the last two months,” he
said. “We have a big bond redemption today. That also should
support the market.”

Yields began to rise after hitting the record low as banks
and other investors sold JGBs, worried they were holding assets
that would lose value as the promised inflation emerged.

The jump in JGB yields has had some central bank officials
increasingly worried about price volatility, but BOJ Governor
Haruhiko Kuroda has no intention of blinking first in the face-
off with the markets over policy.

Both the 20- and 30-year yields climbed to a four-week high
on Thursday. The 20-year yield gained 4 basis
points to 1.730 percent, while the 30-year yield
added 3 basis points to 1.860 percent.

The spread between the 10-year and 20-year JGB yields
widened to 89.5 basis points to a six-week high.

Ten-year JGB futures eased 0.38 point to 142.58,
holding above their 20-day moving average of 142.58 after
trading as low as 142.37.

“The market reaction today tells us the U.S. tapering talk
has very limited impact on the JGB market,” said Shogo Fujita,
chief Japan bond strategist at Bank of America Merrill Lynch.

“It sill remains a very BOJ-driven market. It will continue
to be this way going forward.”

The Nikkei ended 1.8 percent higher at 13,245.22 points, its highest since June 12 and closing above the bottom of the Ichimoku cloud in a bullish sign.

SoftBank (9984.T: Quote, Profile, Research), which is trying to take control of Sprint (S.N: Quote, Profile, Research), was the top-weighted gainer in the Nikkei, up 4.2 percent after U.S. Dish Network Corp (DISH.O: Quote, Profile, Research) said it would not make a new offer to buy Sprint.

“There is a trust set up today with 74.2 billion yen accumulated … buying Topix 100 excluding financials,” a senior trader at a foreign bank said, explaining the stronger market. The Topix 100 rose 2 percent.

The trust is being launched by Daiwa.

Banks were also in demand after their recent battering, with Sumitomo Mitsui Financial Group (8316.T: Quote, Profile, Research) up 5.2 percent and Mitsubishi UFJ Financial Group (8306.T: Quote, Profile, Research) adding 2.4 percent.

The broader Topix index gained 1.9 percent to 1,106.57, with 2.81 billion shares changing hands, up from a near six-month low of 2.43 billion shares hit on Tuesday but sharply below this year’s daily average of 3.88 billion.

Tokyo Electric Power Co (9501.T: Quote, Profile, Research), which was the most traded stock on the main board by turnover, sagged 3.9 percent after the utility said high levels of toxic strontium-90 have been found in groundwater at the Fukushima nuclear power plant, which was crippled by the March 2011 earthquake and tsunami.

Investors are looking to the U.S. Federal Reserve to clarify the outlook on its massive stimulus when it ends a two-day policy meeting later in the day. Global markets have been roiled since Fed Chairman Ben Bernanke suggested last month that the stimulus could be reduced in coming months if the economy continued to recover.

The Nikkei has lost 17 percent since hitting a 5-1/2 year peak on May 23 on concerns over Fed stimulus as well as slowing growth in China, Japan’s second-largest export market, and disappointment over Prime Minister Shinzo Abe’s growth strategy to revive the economy. It entered a bear market last week after dropping more than 20 percent from that multi-year high.

With the recent sell-off, fund managers’ appetite for Japanese equities have cooled somewhat. A monthly survey of asset managers by Bank of America Merrill Lynch showed investors’ net overweight of Japanese stocks eased to 17 percent from 31 percent in May.

“ATTRACTIVE AGAIN”

Societe Generale, however, said the Nikkei was “attractive again” after the 20 percent correction.

“Neighbouring markets like Korea, China or Taiwan should suffer as attractiveness relative to Japan has diminished,” it said.

Although some unloading of long Nikkei positions by hedge funds occurred in April and May, overall their net long positions have kept up at high levels, SG’s Arthur van Slooten said.

Japanese equities’ 12-month forward price-to-earnings ratio fell from a three-year high of 16.3 reached three weeks ago to 13.6, a level not seen since early April, when the Bank of Japan unveiled sweeping stimulus measures to spur growth, according to Thomson Reuters Datastream.

The benchmark Nikkei is still up 7 percent since April 4, and has risen 27 percent so far this year.

“Japan appears to be benefiting more strongly and quickly than expected from the government and central bank’s monetary and fiscal stimulus,” ABN AMRO Private Banking wrote in a report.

“We focus on sectors and stocks with low valuations and restored profitability. This includes the auto industry, as it rolls out next-generation car models and benefits from contributions from key export markets.”

(Editing by Kim Coghill)

The Nikkei .N225 ended 1.8 percent higher at 13,245.22 points, its highest since June 12 and closing above the bottom of the Ichimoku cloud in a bullish sign.

SoftBank (9984.T: Quote, Profile, Research, Stock Buzz), which is trying to take control of Sprint (S.N: Quote, Profile, Research, Stock Buzz), was the top-weighted gainer in the Nikkei, up 4.2 percent after U.S. Dish Network Corp (DISH.O: Quote, Profile, Research, Stock Buzz) said it would not make a new offer to buy Sprint.

“There is a trust set up today with 74.2 billion yen ($776 million) accumulated … buying Topix 100 excluding financials,” a senior trader at a foreign bank said, explaining the stronger market. The Topix 100 rose 2 percent.

The trust is being launched by Daiwa.

Banks were also in demand after their recent battering, with Sumitomo Mitsui Financial Group (8316.T: Quote, Profile, Research, Stock Buzz) up 5.2 percent and Mitsubishi UFJ Financial Group (8306.T: Quote, Profile, Research, Stock Buzz) adding 2.4 percent.

The broader Topix .TOPX index gained 1.9 percent to 1,106.57, with 2.81 billion shares changing hands, up from a near six-month low of 2.43 billion shares hit on Tuesday but sharply below this year’s daily average of 3.88 billion.

Tokyo Electric Power Co (9501.T: Quote, Profile, Research, Stock Buzz), which was the most traded stock on the main board by turnover, sagged 3.9 percent after the utility said high levels of toxic strontium-90 have been found in groundwater at the Fukushima nuclear power plant, which was crippled by the March 2011 earthquake and tsunami.

Investors are looking to the U.S. Federal Reserve to clarify the outlook on its massive stimulus when it ends a two-day policy meeting later in the day. Global markets have been roiled since Fed Chairman Ben Bernanke suggested last month that the stimulus could be reduced in coming months if the economy continued to recover.

The Nikkei has lost 17 percent since hitting a 5-1/2 year peak on May 23 on concerns over Fed stimulus as well as slowing growth in China, Japan’s second-largest export market, and disappointment over Prime Minister Shinzo Abe’s growth strategy to revive the economy. It entered a bear market last week after dropping more than 20 percent from that multi-year high.

With the recent sell-off, fund managers’ appetite for Japanese equities have cooled somewhat. A monthly survey of asset managers by Bank of America Merrill Lynch showed investors’ net overweight of Japanese stocks eased to 17 percent from 31 percent in May.

“ATTRACTIVE AGAIN”

Societe Generale, however, said the Nikkei was “attractive again” after the 20 percent correction.

“Neighboring markets like Korea, China or Taiwan should suffer as attractiveness relative to Japan has diminished,” it said.

Although some unloading of long Nikkei positions by hedge funds occurred in April and May, overall their net long positions have kept up at high levels, SG’s Arthur van Slooten said.

Japanese equities’ 12-month forward price-to-earnings ratio fell from a three-year high of 16.3 reached three weeks ago to 13.6, a level not seen since early April, when the Bank of Japan unveiled sweeping stimulus measures to spur growth, according to Thomson Reuters Datastream.

The benchmark Nikkei is still up 7 percent since April 4, and has risen 27 percent so far this year.

“Japan appears to be benefiting more strongly and quickly than expected from the government and central bank’s monetary and fiscal stimulus,” ABN AMRO Private Banking wrote in a report.

“We focus on sectors and stocks with low valuations and restored profitability. This includes the auto industry, as it rolls out next-generation car models and benefits from contributions from key export markets.”

($1 = 95.5950 Japanese yen)

(Editing by Kim Coghill)

Sony Corp (6758.T: Quote, Profile, Research, Stock Buzz) climbed 3.6 percent after New York-based hedge fund company Third Point said it had raised its stake in the Japanese firm and asked for an opportunity to present its proposal for a partial spin-off of Sony’s entertainment unit to the board.

It was the most traded stock on the main board by turnover.

The Nikkei .N225 advanced 0.6 percent to 13,107.03, breaking above the bottom of the Ichimoku cloud in a bullish sign. It climbed 2.7 percent on Monday, lifting the index out of bear market territory.

“The yen move is obviously driving the yen-sensitives higher from their low positions … It’s a nice pick-up in volume versus yesterday but nothing really fundamental,” a senior trader at a foreign brokerage said.

The yen was last traded at 94.79 yen to the dollar on Tuesday, down from the previous session’s high of 94.08, giving exporters some support.

Toyota Motor Corp (7203.T: Quote, Profile, Research, Stock Buzz) put on 1.6 percent and was the second-most traded, while Subaru maker Fuji Heavy Industries (7270.T: Quote, Profile, Research, Stock Buzz) added 1.9 percent and Mazda Motor (7261.T: Quote, Profile, Research, Stock Buzz) gained 1.4 percent.

The broader Topix .TOPX index gained 0.6 percent to 1,091.18, ahead of a two-day Fed meeting that will begin on Tuesday.

Many investors have been cutting their long Japanese equities and short yen positions on concerns that the Fed will scale back its stimulus and after the Nikkei had rallied more than 80 percent from mid-November to its 5-1/2 year peak hit on May 23. Since then, trading in Japanese equities has been extremely volatile.

Disappointment over a growth strategy unveiled by the Japanese government recently and worries over slowing growth in China have also contributed to the market tumult.

Underscoring the volatility, since May 23 the Nikkei has had 15 sessions where intraday swings exceeded 2.5 percent, compared with 16 such trading days for the year up to May 22 and four such days in the whole of 2012. The U.S. S&P 500 .INX only has had one such trading day in 2013, and the Euro STOXX 50 .STOXX50E index has 11.

The benchmark Nikkei has fallen 17.6 percent since that mulityear high on May 23, but is still up 6 percent since April 4, when the Bank of Japan unveiled sweeping stimulus measures and has risen 26 percent this year.

(Editing by Shri Navaratnam)

By the midday break, the Nikkei was up 152.14 points at 12,838.66 after trading as low as 12,549.82 on the back of weak U.S. stocks on Friday. Monday’s gain took the index above its 100-day moving average at 12,735.31 but remained below the Ichimoku cloud in a bearish sign.

“It’s a mixed flow so far. It doesn’t seem to be the type of guys that work on the cash side. It could be something else – high-frequency trading-driven or it could be retail-driven,” a senior trader at a foreign bank said. “There is nothing on the cash side here.”

Amid market gyration and uncertainty over whether the U.S. Federal Reserve will start to scale back its massive stimulus, investors are likely to be cautious ahead of a two-day U.S. central bank meeting starting on Tuesday.

The extreme volatility and big falls in the Nikkei in the past few weeks have been accompanied by disappointment over the government’s recently unveiled growth strategy, which has led some investors to trim back their high expectations for Prime Minister Shinzo Abe’s growth-spurring policies.

Within defensive plays, the food sector was up 3.3 percent and Japan Tobacco gained 4.9 percent, while Takeda Pharmaceutical Co Ltd rose 2.3 percent and peer Eisai Co Ltd advanced 3.4 percent.

The broader Topix index climbed 1.3 percent to 1,070.22 in light trade, with volume at 31 percent of its full daily average for the past 90 trading days, indicating relatively low conviction of the rebound.

The real estate sector, which had rallied 70 percent this year to May 22 as it is seen to benefit most from Japan’s push to reflate the economy, remained under pressure.

It was the worst sectoral performer on Monday, down 2.9 percent. The sector has lost 28 percent from a 5-1/2 year high touched on April 12.

GOLDMAN UPBEAT

Goldman Sachs, however, remained upbeat on the market, maintaining its 12-month Nikkei target of 17,000, and said the pullback offered another opportunity to invest in reflation and consumption-related stocks.

“The yen is not the sole driver of Japan’s profit recovery. Evidence is growing that consumption, production and housing investment are improving, so even if the dollar/yen averages 95 in FY2013-FY2014, EPS growth would still reach nearly 70 percent,” the brokerage wrote in a note.

Investors, mainly hedge funds, have been cutting their long Japanese equities and short yen positions on the Fed’s stimulus concerns and after the Nikkei had rallied more than 80 percent from mid-November to its 5-1/2 year peak hit on May 23.

The Nikkei volatility index dropped 4.9 percent to 39.6 on Monday but remained elevated after hitting 46.2 on Thursday, its highest close since the March 2011 earthquake and tsunami. The lower the volatility index, the higher the investors’ risk appetite.

The Nikkei has fallen 19.5 percent since hitting the multiyear peak on May 23, but is still up 3.9 percent since April 4, when the Bank of Japan unveiled sweeping stimulus measures aimed at breaking years of entrenched deflation and reviving growth. The benchmark is up 23.5 percent this year.

(Editing by Eric Meijer and Shri Navaratnam)

The Nikkei .N225 added 0.4 percent to 12,7329.85 after trading as low as 12,549.82 on the back of weak U.S. stocks on Friday. Monday’s gain took the index above its 100-day moving average at 12,734.37

“It’s a mixed flow so far. It doesn’t seem to be the type of guys that work on the cash side. It could be something else – high-frequency trading driven or it could retail driven,” a senior trader at a foreign bank said. “There is nothing on the cash side here.”

“Defensives are outperforming but we are starting to see some tech names are popping up to positive territory.”

Amid market gyration and uncertainty over whether the U.S. Federal Reserve will start to scale back its massive stimulus, investors are likely to be cautious ahead of a two-day U.S. central bank meeting starting on Tuesday.

Within defensive plays, the food sector was up 2.8 percent and Japan Tobacco (2914.T: Quote, Profile, Research, Stock Buzz) gained 4.4 percent, while Takeda Pharmaceutical Co Ltd (4502.T: Quote, Profile, Research, Stock Buzz) rose 2.3 percent and peer Eisai Co Ltd (4523.T: Quote, Profile, Research, Stock Buzz) advanced 2.7 percent.

The broader Topix .TOPX index climbed 1.1 percent to 1,068.22 on Monday morning, with volume at 18 percent of its full daily average for the past 90 trading days.

The real estate sector , which had rallied 70 percent this year to May 22 as it is seen to benefit most from Japan’s push to reflate the economy, remained under pressure.

It was the worst sectoral performer on Monday, down 2.5 percent. The sector has lost nearly 28 percent from a 5-1/2 year high touched on April 12.

Goldman Sachs, however, remained upbeat on the market, maintaining its 12-month Nikkei target of 17,000, and said the pullback offered another opportunity to invest in reflation and consumption-related stocks.

“The yen is not the sole driver of Japan’s profit recovery. Evidence is growing that consumption, production and housing investment are improving, so even if the dollar/yen averages 95 in FY2013-FY2014, EPS growth would still reach nearly 70 percent,” the brokerage wrote in a note.

Investors, mainly hedge funds, have been cutting their long Japanese equities and short yen positions on the Fed’s stimulus concerns and after the Nikkei had rallied more than 80 percent from mid-November to its 5-1/2 year peak hit on May 23.

The extreme volatility and big falls in the past few weeks have been accompanied by disappointment over the government’s recently unveiled growth strategy, which has led some investors to trim back their high expectations for Prime Minister Shinzo Abe’s growth-spurring policies.

The Nikkei has fallen 20 percent since hitting the multiyear peak on May 23, staying in bear market territory, but is still up 3 percent since April 4, when the Bank of Japan unveiled sweeping stimulus measures and has risen 22 percent this year.

(Editing by Eric Meijer)

“People are unwinding (short) positions, or people are trying to buy on dips. The market did rebound and the U.S. did well so people are buying on the back of that,” a senior dealer at a foreign bank said.

U.S. stocks rallied overnight after retail sales rose more than expected in May and first-time applications for unemployment benefits fell last week – signs of economic resilience.

The senior dealer said buy orders outpaced sell orders by three to one and there was a good balance between long-only investors and hedge funds, although long-only players were a bit more active.

“For the time being, the Nikkei is trying to find itself where it should be after the crazy opening,” he said, referring to Nikkei June futures and options contracts settlement, known as “special quotation”.

The Nikkei ended up 241.14 points at 12,686.52 after trading as high as 12,900.65, though it was still holding below the Ichimoku cloud in a bearish sign. For the week, it was down 1.5 percent, marking its fourth straight weekly loss, its longest such losing streak since October.

The Osaka Securities Exchange said after the close that Nikkei futures and options contracts for June settled at 12,668.04.

BEAR MARKET

On Thursday, the Nikkei tumbled 6.4 percent to its lowest close since April 3, the day before the Bank of Japan unveiled sweeping stimulus to revive the economy, and below the Ichimoku cloud for the first time since mid-November. It also took the slide from a 5-1/2-year peak hit on May 23 to nearly 22 percent, slumping into a bear market and wiping about $700 billion off the Nikkei’s market capitalisation.

Over the past three weeks, trading in the Nikkei has been volatile. The 30-day implied volatility for the benchmark jumped to 42.3 percent on Thursday, its highest since the March 2011 earthquake and tsunami, according to Thomson Reuters Datastream.

Investors, mainly hedge funds, have been cutting their long Japanese equities and short yen positions on concerns that the Fed will roll back its stimulus and after the Nikkei had rallied more than 80 percent from mid-November to that multi-year high.

Tsukasa Shimoda, the founder and president of Galleyla Investment, said he was cautious in the short-term but the recent sell-off offered good opportunity in the medium-term.

“If I see a better chance, I will increase the net positions,” said Shimoda, whose hedge fund has a size of $10 million.

The broader Topix index advanced 1.2 percent to 1,056.45 in active trade on Friday, with trading volume hitting a one-week high of 3.77 billion shares.

Beaten-down real estate companies were in demand, up 4.4 percent, while exporter Toshiba Corp (6502.T: Quote, Profile, Research) gained 2.9 percent.

Nomura Securities was bullish, lifting its Nikkei year-end target to 18,000 from 16,000, despite the recent sell-off.

“We do not brush off the recent stock market turmoil lightly. Indeed, we see it as significant because it constitutes a challenge to Abenomics,” it said in a note.

“If share prices fall back to where they were before the BOJ announced its new phase of monetary easing, this could prompt market observers to pronounce Abenomics a failure.”

The sell-off has taken Japanese equities’ valuations, measured by the 12-month forward price-to-earnings, to 14.1 from a three-year high of 16.3 touched two weeks ago, Datastream showed.

(Editing by Jacqueline Wong)

“People are unwinding (short) positions, or people are trying to buy on dips. The market did rebound and the U.S. did well so people are buying on the back of that,” a senior dealer at a foreign bank said.

U.S. stocks rallied overnight after retail sales rose more than expected in May and first-time applications for unemployment benefits fell last week – signs of economic resilience.

The senior dealer said buy orders outpaced sell orders by three to one and there was a good balance between long-only investors and hedge funds, although long-only players were a bit more active.

“For the time being, the Nikkei is trying to find itself where it should be after the crazy opening,” he said, referring to Nikkei June futures and options contracts settlement, known as “special quotation”.

By the midday break, the Nikkei was up 343.04 points at 12,788.42 after trading as high as 12,889.46, though it was still holding below the Ichimoku cloud in a bearish sign.

OUT OF BEAR MARKET

On Thursday, the Nikkei tumbled 6.4 percent to its lowest close since April 3, the day before the Bank of Japan unveiled sweeping stimulus to revive the economy, and below the Ichimoku cloud for the first time since mid-November. It also took the slide from a 5-1/2-year peak hit on May 23 to nearly 22 percent, slumping into a bear market and wiping about $700 billion off the Nikkei’s market capitalisation.

Over the past three weeks, trading in the Nikkei has been volatile. The 30-day implied volatility for the benchmark jumped to 42.3 percent on Thursday, its highest since the March 2011 earthquake and tsunami, according to Thomson Reuters Datastream.

Investors, mainly hedge funds, have been cutting their long Japanese equities and short yen positions on concerns that the Fed will roll back its stimulus and after the Nikkei had rallied more than 80 percent from mid-November to that multi-year high.

The broader Topix index climbed 2 percent to 1,065.28 in active trade on Friday morning, with volume at 58 percent of its full daily average for the past 90 trading days.

Beaten-down real estate companies were in demand, up 3.5 percent, while exporters Toshiba Corp and Hitachi Corp were up 3.8 and 2.7 percent respectively.

NOMURA STAYS BULLISH

Nomura Securities was bullish, lifting its Nikkei year-end target to 18,000 from 16,000, despite the recent selloff.

“We do not brush off the recent stock market turmoil lightly. Indeed, we see it as significant because it constitutes a challenge to Abenomics,” it said in a note.

“If share prices fall back to where they were before the BOJ announced its new phase of monetary easing, this could prompt market observers to pronounce Abenomics a failure.”

The sell-off has taken Japanese equities’ valuations, measured by the 12-month forward price-to-earnings, to 14.1 from a three-year high to 16.3 touched two weeks ago, Datastream showed.

(Editing by Eric Meijer)

“People are unwinding (short) positions, or people are trying to buy on dips. The market did rebound and the U.S. did well so people are buying on the back of that,” a senior dealer at a foreign bank said.

U.S. stocks rallied overnight after retail sales rose more than expected in May and first-time applications for unemployment benefits fell last week, in signs of economic resilience.

The senior dealer said buy orders outpaced sell orders by three to one and there was a good balance between long-only investors and hedge funds, although long-only players were a bit more active.

“For the time being, the Nikkei is trying to find itself where it should be after the crazy opening,” he said, referring to Nikkei June futures and options contracts settlement, known as “special quotation”.

The Nikkei .N225 was up 238.31 points at 12,683.69 after trading as high as 12,889.46, though it was still holding below the Ichimoku cloud in a bearish sign.

On Thursday, the Nikkei tumbled 6.4 percent to its lowest close since April 3, the day before the Bank of Japan unveiled sweeping stimulus to revive the economy, and below the Ichimoku cloud for the first time since mid-November. It also took the slide from a 5-1/2-year peak hit on May 23 to nearly 22 percent, slumping into a bear market and wiping about $700 billion off the Nikkei’s market capitalization.

Over the past three weeks, trading in the Nikkei has been volatile. The 30-day implied volatility for the benchmark jumped to 42.3 percent on Thursday, its highest since March 2011 earthquake and tsunami, according to Thomson Reuters Datastream.

Investors, mainly hedge funds, have been cutting their long Japanese equities and short yen positions on concerns that the Fed will roll back its stimulus and after the Nikkei had rallied more than 80 percent from mid-November to that multi-year high.

Beaten-down real estate companies were in demand on Friday, up 4.2 percent, while securities firms rose 2.4 percent, with Nomura Holdings (8604.T: Quote, Profile, Research, Stock Buzz), Japan’s top brokerage, up 2.2 percent.

The broader Topix .TOPX index was up 1.7 percent at 1,062.25 by mid-morning, with volume at 43 percent of its full daily average for the past 90 trading days.

The sell-off has taken Japanese equities’ valuations, measured by the 12-month forward price-to-earnings, to 14.1 from a three-year high to 16.3 touched two weeks ago, Datastream showed.

(Editing by Jacqueline Wong)

The Nikkei .N225 ended 0.2 percent lower at 13,289.32 after trading as low as 12,994.08. The index trimmed losses in the afternoon, with traders suspecting the central bank was buying exchange traded funds to support the market.

“The market has been oversold. It is looking for an opportunity to go higher,” a senior trader at a foreign bank said, adding that he had more buy orders than sell orders in the afternoon.

Traders noted that there had been a rumor that the Government Pension Investment Fund was in the market during the day but most discounted the rumor, saying that relatively light trading volume did not back it up.

Japan’s GPIF, which has more than $1 trillion in assets, said last week it would increase its asset allocation in stocks and trim its exposure in Japanese government bonds (JGBs).

Societe Generale said the most traded Nikkei index stock options was a call with a strike price of 14,000, up 5.3 percent where the index closed on Wednesday, and with a June expiry. The next-most trade was also a call at 13,750, followed by another call at 13,500.

On Tuesday, the benchmark lost 1.5 percent after the BOJ did not announce a new long-dated funding operation to calm the bond market that some had expected.

Ironically, the bond market has stabilized in the past two weeks, with the 10-year JGB yield trading in a range of 0.80 to 0.90 percent. The 10-year yield was last traded at 0.880 percent on Wednesday.

VOLATILE MARKET

Trading in Japanese stocks and the yen has become more volatile lately as many global macro funds cut their positions in long Japanese equities and short yen to cash in profits after the Nikkei have rallied more than 80 percent from mid-November to a 5-1/2 year peak hit on May 23.

The Nikkei has since fallen nearly 17 percent from the multi-year high, triggered by concerns over slowing China growth and the U.S. Federal Reserve scaling back its massive stimulus. Investors have also been disappointed with Prime Minister Shinzo Abe’s growth strategy to revive the world’s third-largest economy.

But the index is still up 7.5 percent since April 4 when the BOJ announced sweeping stimulus measures, and has risen 28 percent so far this year.

The real estate sector , which has benefited most by the government’s push to reflate the economy, was among the top losers on Wednesday, down 1.7 percent. It has lost nearly 26 percent since hitting a 5-1/2 year high on April 12 but is still up 26 percent so far this year.

Despite the selloff, valuations in the real estate sector remain elevated, with a 12-month forward price-to-book ratio of 2.36, above a five-year average of 1.4 and Japanese equities’ current average of 1.24, Thomson Reuters Datastream showed.

The broader Topix .TOPX index eased 0.4 percent to 1,096.54, with trading volume hitting a one-month low of 2.99 billion shares.

Exporters also took a battering as the yen strengthened against the dollar. The Japanese currency was last traded at 96.72 yen to the greenback after gaining 2.7 percent overnight to mark its biggest one-day rise since May 2010, according to EBS trading platform.

Toyota Motor Corp (7203.T: Quote, Profile, Research, Stock Buzz) lost 1.8 percent and was the second-most traded on the main board by turnover, while Mazda Motor Corp (7261.T: Quote, Profile, Research, Stock Buzz), also heavily traded, fell 2.4 percent and Suzuki Motor Corp (7269.T: Quote, Profile, Research, Stock Buzz) sagged 4.3 percent.