RTRS: Nikkei falls 1.6 percent after 3-day rally, BOJ eyed
TOKYO (Reuters) - The Nikkei average fell 1.6 percent on Friday as investors sold Japanese stocks that had rebounded sharply in a three-day rally, while they nervously awaited a rate decision by the Bank of Japan.
Automakers skidded on worries about their earnings prospects, after downward revisions from rivals including Mazda Motor Corp.
But the market trimmed earlier losses in afternoon trade as initial profit taking seemed to have run its course.
"It was no surprise to see short-term profit taking after the Nikkei surged in the last three days, though once that is over, investors will realize that nothing has really changed," said Yoshinori Nagano, a chief strategist at Daiwa Asset Management.
"The market has already fully factored in a rate cut by the BOJ. If it didn't cut rates, the market would capsize. The BOJ doesn't really have a choice now, whether it likes it or not, whether it thinks it's the right thing or not."
As of 0424 GMT, the benchmark Nikkei .N225 had shed 146.23 points to 8,883.53, after falling nearly 4 percent at one stage.
In the three-day rally to Thursday, the Nikkei gained nearly 30 percent.
The broader Topix .TOPX fell 0.8 percent to 892.25.
Expectations are high that the Bank of Japan may halve its key interest rate to 0.25 percent, its first rate cut in seven years, as Japan feels the effect of the crisis spreading through the country's key export markets.
China, Hong Kong and Taiwan also cut rates this week, with the European Central Bank and Australia seen following suit next week, in the midst of a sharp deterioration in major economies.
Mazda and Mitsubishi Motors Corp (7211.T: Quote, Profile, Research, Stock Buzz) lowered their profit forecasts on Thursday, joining Honda Motor Co (7267.T: Quote, Profile, Research, Stock Buzz) in predicting bigger falls in profits this year.
Shares of Mazda tumbled 10.1 percent to 222 yen, while Mitsubishi Motors gained 0.8 percent to 133 yen.
Honda lost 7.1 percent to 2,565 yen and Toyota Motor Co (7203.T: Quote, Profile, Research, Stock Buzz) slipped 0.8 percent to 3,930 yen.
Nissan Motor Co (7201.T: Quote, Profile, Research, Stock Buzz) is due to announce its first-half results after the close, which are expected to be weak due to deteriorating U.S., European, Japanese markets and the stronger yen.
(Reporting by Aiko Hayashi; Editing by Edwina Gibbs)
