Bank of America Corp (NYSE:BAC) released a report today to assuage fears about the performance of Asian markets overnight. In news that escaped the attention of very few on this morning’s market, the Nikkei fell by more than 7 percent in overnight trading.

Bank of America (AKA BAML) says there’s little to point to today’s move being the start of a major decline, and the bank leaves its forecast for Japan unchanged from its previous report.

Nikkei

Bank of America Corp (NYSE:BAC) offers some reasons as to why the market fell by so much in trading. Naoki Kamiyama, the author of the report, takes a Japan centric view of the fall in the Nikkei, not mentioning the change in Bernanke’s policy or weak Chinese data in the report. According to Kamiyama, the reasons behind the fall probably had more to do with profit seeking.

The Merril Lynch Japan analyst believes that the fall represented “short-term investors had been waiting for the right opportunity to lock in profits.” That explanation hasn’t been a popular one in the media this morning, with reporters preferring the US and China based narrative around the collapse of the Nikkei.

Troubling News About Nikkei:

There is some troubling news about the Nikkei, aside from its obvious loss in value. According to a Societe Generale SA (OTCMKTS:SCGLY) (EPA:GLE) report released today, hedge funds have already begun to sell out of Japanese stocks after taking the boosts provided by the country’s Abenomics plan. The SG report, which shows that 32 percent of open interest in the Nikkei is held by hedge funds supports Kamiyama’s explanation of the Nikkei drop.

Whether or not this morning’s fall had to do with short term investors getting out at a high or poor economic indicators from the rest of the world, there seems to be some consensus that the fall is a short term phenomenon. Kamiyama doesn’t alter the outlook for Japan from previous reports.

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Kamiyama says that the spike in trading volume seen during the decline in the Nikkei supports the idea that there was not a unidirectional movement by the market. Many investors are still betting on Japan’s ability to rally through the rest of 2013. The Bank of America Corp (NYSE:BAC) report is strongly optimistic on Japan.

The recommendation from Kamiyama is a simple and direct one, buy the dip. Kamiyama says that Investors are likely to look for more value outside of the leading sectors trough the rest of 2013.