By Junko Fujita
TOKYO, Jan 16 (Reuters) - Japan’s Nikkei share average slipped for a second consecutive session on Friday, as investors took a breather following a rally that was driven by hopes for expanded fiscal stimulus.
The Nikkei (.N225) was down 0.44% at 53,867.19, as of 0200 GMT, while the broader Topix (.TOPX) slipped 0.28% to 3,658.81.
The Nikkei has risen 3.7% this week and the Topix has added 4%, following a report that Prime Minister Sanae Takaichi might dissolve parliament this month and call for a general election in February. The report was confirmed by the Liberal Democratic Party’s secretary general on Wednesday.
For the month, the Nikkei and the Topix both have gained more than 7%.
“The market needed to pause after the sharp gains this week. Today’s declines are small adjustment to reflect that sentiment… The overall view has not changed,” said Kazunori Tatebe, chief strategist at Daiwa Asset Management.
“The market priced in the best political scenario where the LDP boosts seats at the election and Takaichi gets backing for spending plans that the stock market has high expectations on.”
But there were some uncertainties over the election outcome, such as the discrepancy between the support rate for Takaichi and the LDP, said Tatebe.
On Thursday, the main opposition Constitutional Democratic Party of Japan and Komeito agreed to form a new political party in an attempt to present a united front against the LDP.
Uniqlo owner Fast Retailing (9983.T) fell 1.62% to drag down the Nikkei the most. Chip-making equipment maker Tokyo Electron (8035.T) slipped 1.17%.
Consulting firm Baycurrent (6532.T) fell 8.89% to become the worst percentage loser on the Nikkei.
On the other hand, chip-testing equipment maker Advantest (6857.T) edged up 0.67% and air-conditioning maker Daikin Industries (6367.T) rose 1.19%.
Of the more than 1,600 stocks trading on the Tokyo Stock Exchange’s prime market, 43% rose, 54% fell and 3% traded flat.

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Japan's Nikkei extends fall as rally loses steam