Japan's Nikkei average slipped 1.5 per cent on Monday after data showed Japan's economy

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slowed sharply in April-June from the previous two quarters as export growth moderated and a stimulus-driven recovery in consumption ran out of steam. But losses were expected to be limited after support for the benchmark held last week at just over 9,000, while charts showed it approaching oversold levels, suggesting it was perhaps due for a bit of a rebound.

Japan's gross domestic product (GDP) grew 0.1 per cent in April-June, translating into an annualised increase of 0.4 per cent, well below market forecasts, after revised 4.4 per cent annualised growth in the first three months of the year. "The contents of the GDP figures were bad, especially what it suggests about deflation," said Nagayuki Yamagishi, a strategist at Mitsubishi UFJ Morgan Stanley Securities.

"And while many companies have anticipated a drop in consumption once stimulus measures wore off and lightened inventories, things are likely to be pretty tough for them going forward if consumption keeps falling and the yen stays strong." The benchmark Nikkei shed 145.37 points to 9,108.68, coming within sight of the 13-month low of 9,065 hit last week, while the broader Topix lost 1.2 per cent to 821.46. The dollar dipped against the yen, losing 0.5 per cent to 85.78 yen.

It hit a 15-year low of 84.72 yen on electronic trading platform EBS last week. "The yen's rise may begin to hurt export growth in the latter half of the current fiscal year" to next March, said Takeshi Minami, chief economist at Norinchukin Research Institute. "I think the Bank of Japan and the government need to take decisive action against currency moves. Solo currency intervention is possible if the yen approaches 80 to the dollar." Market players said that while the yen's rise has yet to have much of an impact on company earnings forecasts for later in the year, that could change should the yen's advance continue.

"Quite a number of companies set their dollar/yen rate assumptions at 90 yen for the year to next March, and I don't think they're that worried yet," said Yamagishi at Mitsubishi UFJ Morgan Stanley Securities. "But should the yen continue to advance, they may be forced to lower their rate assumptions still further, and this would have a negative impact on forecasts."

REBOUND?

Technically, the Nikkei may be due for a bit of a rebound. The benchmark was touching its lower Bollinger Band after breaking below it last week, while its relative strength index (RSI) hovered around 37. Anything at 30 and below is considered oversold. The Nikkei's slow stochastic also hovered just on the edge of oversold territory. Exporters slipped broadly. Canon Inc shed 1.5 per cent to 3,525 yen and Kyocera Corp slid 2.4 per cent to 7,480 yen.

Honda Motor Co retreated 1.9 per cent to 2,737 yen. But Gree shares jumped 6.6 per cent to 6,760 yen after the company said on Friday it has overtaken Mixi Inc to become Japan's biggest social networking site, having seen a near tripling in subscribers in the past two years as users flocked to its mobile games. Gree had 21.13 million users by the end of July compared with 21 million for Mixi.