February 9, 2017 / 3:37 AM / 6 months ago

Nikkei skids on stronger yen ahead of U.S.-Japan summit

TOKYO, Feb 9 (Reuters) - Japan's Nikkei share average slipped on Thursday due to pressure from a stronger yen ahead of a meeting this week between U.S. President Donald Trump and Japan's Prime Minister Shinzo Abe.

The Nikkei was down 0.2 percent at midday at 18,971.46.

The dollar drooped against its peers early on Thursday, hovering near a 10-week low versus the yen, after U.S. Treasury yields slumped due to investor flight to safety.

Wall Street provided few directional cues after a mixed performance. The S&P 500 on Wednesday ended slightly higher on earnings reports, while the Dow Jones Industrial Average slipped as bank stocks weighed.

Hedge funds have been trimming their dollar positions since Trump started expressing concerns about a strong dollar, said Norihiro Fujito, a senior investment strategist at Mitsubishi UFJ Morgan Stanley Securities.

Trump and his top trade adviser Peter Navarro criticised Japan, Germany and China last week, saying these U.S. trading partners were engaged in devaluing their currencies.

On Friday, Abe will meet with Trump and propose a new cabinet level framework for U.S.-Japan talks on trade, security and macroeconomic issues, including currencies, a Japanese government official involved in planning the summit said.

"Trade and defense will be in focus," Fujito said. "We need to see if anything is said that has an effect on currencies, or on specific companies."

Abe, who will be accompanied by Finance Minister Taro Aso and Foreign Minister Fumio Kishida, will bring a package of steps Tokyo says could create 700,000 U.S. jobs through private-public investment in infrastructure such as high-speed trains, government sources say.

The market largely shrugged off hopeful signs in core machinery order data released earlier on Thursday. Orders rose 6.7 percent in December from the previous month, swinging from the prior month's decline, in a tentative sign of a pickup in Japan's capital expenditure.

Bank of Japan Deputy Governor Hiroshi Nakaso said on Thursday risks to the country's economic and price outlook were skewed to the downside, signalling the bank's resolve to maintain its massive monetary stimulus.

Hitachi Ltd's shares skidded 7 percent after Mitsubishi Heavy Industries Ltd asked it to pay 89.7 billion rand ($6.68 billion) to cover costs related to a joint venture working on a South African power plant project.

Nisshinbo Holdings Inc fell 3.9 percent after the manufacturer dropped Mexico as a site for a new plant to make automotive brake materials, in light of Trump's push to renegotiate the North American Free Trade Agreement (NAFTA), according to Nikkei.

SoftBank Group Corp shares bucked the broader market downturn and rose 2.6 percent, after the telecom giant's October-December operating profit soared 71 percent to 295.7 billion yen, beating a Thomson Reuters Starmine SmartEstimate of 246.30 billion yen.

The broader Topix fell 0.3 percent to 1,519.60, while the JPX-Nikkei Index 400 was down 0.4 percent at 13,621.92. (Reporting by Tokyo markets team; Editing by Randy Fabi)

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