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Japan's Nikkei drops after BOJ's plan to buy only Topix-linked ETFs

TOKYO, March 19 (Reuters) - Japan’s benchmark Nikkei fell as much as 1.9% on Friday, while the broader Topix hit a 30-year high as the Bank of Japan said it would only buy Topix-linked exchange traded funds after a review of its policy framework.

Nikkei share average fell 1.15% to 29,868.00 by 0436 GMT. The broader Topix gained 0.14% to 2,011.29, having briefly hit its highest level since 1991.

Following its two-day policy meeting, the Bank of Japan said it would only buy exchange-traded funds (ETF) that are linked to the Topix index.

The BOJ also said it will buy up to 12 trillion yen at most and also slightly broadened a trading band for its 10-year bond yield target, widely as expected.

Nikkei heavyweight Fast Retailing, the operator of Uniqlo clothing stores fell 4.6%. Another heavyweight SoftBank Group fell 2.01%.

The so-called NT ratio of the Nikkei and Topix dropped sharply to 14.84 from 15.04 on Thursday. It hit a record high of 15.68 earlier this month.

But some analysts said the Nikkei’s underperformance will be fairly short-lived.

“The impact of the BOJ’s move on the Nikkei will be limited,” said Shingo Ide, chief equity strategist at NLI Research Institute. “It will contribute to a healthy correction in the NT ratio.” (Reporting by Junko Fujita; editing by Uttaresh.V)

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