Tokyo: Japanese stocks paused for breath on Friday after hitting their highest closing level in nearly six years in the previous session, and as the yen tumbles are on track for their best November gain since 1998.
Investors also held back from chasing other regional equities higher, with the MSCI Asia-Pacific outside Japan index steadying after reaching its highest close in a week on Thursday.
Japan`s benchmark Nikkei dipped 0.1 percent, though it is still up 9.7 percent this month as the yen slumped against the euro and dollar.
Investors have been using the yen as a funding currency for carry trades with the Bank of Japan committed to keeping ultra-loose monetary policy to shore up growth -- in contrast to the U.S. Federal Reserve which is moving towards unwinding its $85 billion-a-month bond-buying campaign.
The Japanese currency hit a five-year low versus the euro at 139.705 yen, and a six-month trough of 102.61 yen to the dollar.
The yen is down 4.6 percent versus the euro this month, heading for its worst monthly performance since March, while it is off 4.3 percent against the greenback -- and set for its biggest one-month fall since January.
Data on Friday showed Japanese consumer inflation accelerated to a five-year high and factory output rose for a second straight month in October, more evidence the recovery in the world`s third-largest economy should extend into 2014.
"Industrial production was good but it was below consensus. Gradually, the market is coming to believe the BOJ will be forced to react again sometime next year," said Kyoya Okazawa, head of global equities and commodity derivatives at BNP Paribas in Tokyo.
"A short-term correction might be possible because of funds` year-end book-closing...fundamentally, there is no reason to short the market, only profit-taking," he added.
Powered by Tokyo`s aggressive fiscal and monetary stimulus, the Nikkei has rallied 51 percent this year. If the gains were to hold for the rest of this year, it would be the best yearly rise since 1972.
By contrast, the MSCI Asia-Pacific ex-Japan index is up a meagre 1.4 percent so far this year.
The Asian gauge has also sharply underperformed a 26.7 percent jump in the U.S. Standard & Poor`s 500 and a 16.3 percent rise in the STOXX Europe 600 index.
Trading across most markets was light, as U.S. financial markets closed for Thursday`s Thanksgiving holiday and will have half-day session on Friday.
Ahead of the euro zone inflation data later in the day, the euro scaled a one-month high of $1.3620.
Preliminary German consumer prices harmonised with other European Union countries accelerated in November, suggesting euro zone inflation could come in higher than expected -- reducing pressure on the ECB to take further action to avoid deflation.
The Australian dollar skidded to a near three-month low of $0.9055.
Analysts at BNP Paribas recommended investors short the euro against the Norwegian crown, sterling and the Australian dollar.
"In addition to the ECB next week, the RBA, Norges Bank and BOE have meetings next week. We think the dovish policy of the ECB will stand in contrast to these other central banks next week, helping push the euro crosses lower," they said in a note.
Among commodities, gold inched down 0.1 percent to around $1,242.5 an ounce, having risen 0.5 percent overnight on signs of physical demand emerged from Chinese buyers.
Brent crude stabilised at about $110.8 a barrel after shedding 0.4 percent in the previous session.
First Published: Friday, November 29, 2013, 09:25