Tokyo - Tokyo stocks closed 0.33 percent lower Thursday as a stronger yen added to profit taking after the Bank of Japan held fire on launching more stimulus measures.
The benchmark Nikkei 225 index snapped a three-day winning streak to finish 52.17 points lower at 15,676.18, while the Topix index of all first-section shares was down 0.39 percent, or 5.13 points, to 1,296.39.
A sharp decline in the yen - which tends to boost shares of Japanese exporters - has lifted the market over the past few sessions, while Prime Minister Shinzo Abe's investor-friendly cabinet shuffle Wednesday also lifted sentiment.
“Hedge funds had placed big bets on the cabinet reshuffle as an 'event trade', shorting the yen and buying stock index futures,” said Daisuke Uno, strategist at Sumitomo Mitsui Banking Corp.
“Now that the event is over, the market is returning to normal, with few trading cues on the horizon,” he added.
On Thursday, Japan's central bank stuck by its view that the world's number three economy was recovering, despite a 1.7 percent contraction in second-quarter gross domestic product - or 6.8 percent at an annualised rate.
The poor data gave the clearest picture yet of the impact of an April sales tax hike, and threw into question plans for another rise next year.
“If the GDP and inflation data do not sufficiently line up to support the hike, a lot of monetary easing is likely going to be in store for investors, which could keep the yen weak for some time to come,” an equity trading director at a European brokerage told Dow Jones Newswires.
In afternoon forex trading, the dollar recovered slightly from a dip after the BoJ meeting to buy 104.91 yen, against 104.78 yen in New York.
Investors are also watching a European Central Bank policy meeting later Thursday, as well as August US non-farm payroll data due Friday.
Nissan shares were up 0.98 percent at 1,023.0 yen after Standard & Poor's upgraded its credit rating Wednesday, pointing to strong profitability and large cash holdings.
Electronics giant Panasonic slipped 0.64 percent to 1,302.5 yen, despite announcing plans to revive its high-end audio brand Technics later this year.
Nippon Steel and Sumitomo Metal fell 1.25 percent to 291.2 yen after an explosion hit a plant in central Japan Wednesday, resulting in 15 injuries. - Sapa-AFP