Japanese stocks advanced, with the Nikkei 225 Stock Average closing at its highest since March 2011, as shares chased gains among Asian markets following a four-day holiday and a weaker yen boosted the earnings outlook for exporters including Toyota Motor Corp. (7203)
Toyota jumped 6.4 percent as Japan’s currency fell to its lowest since July 2010 against the dollar. Fanuc Corp. (6954), which supplies robots used in Chinese factories, climbed 3.9 percent after a manufacturing report earlier this week added to signs the world’s second-largest economy is recovering. Japan Exchange Group Inc., created by the merger of the country’s two biggest bourses, plunged 9.7 percent in its Tokyo trading debut.
The Nikkei 225 climbed 2.8 percent to close at 10,688.11 in Tokyo, gaining the most on an opening day since 2002. The broader Topix Index climbed 3.3 percent to 888.51. Japanese shares caught up with a rally in Asian markets this week that came after the U.S. Congress passed legislation to avert more than $600 billion in automatic tax increases and spending cuts that might have pushed the economy into a recession.
“We’ve averted a worst-case scenario on the fiscal cliff and the market is breathing a sigh of relief,” said Juichi Wako, senior strategist at Nomura Securities Co. in Tokyo. “Companies have already settled their exchange rates for this quarter, so we shouldn’t see too much upward movement in earnings from the yen’s weakness right away. But investors expect next quarter to look pretty good.”
The Japanese yen fell to a two-and-half year low against the dollar, heading for a 2.1 percent decline this week and extending losses for an eighth week, extending its longest losing streak since 1989.
The currency dropped before Bank of Japan Deputy Governor Kiyohiko Nishimura is due to speak in San Diego today amid bets the BOJ will boost money supply to end deflation. The BOJ will hold its first policy meeting this year on Jan. 21-22.
Exporters advanced. Toyota climbed 6.4 percent to 4,260 yen. Honda Motor Co. rose 4 percent to 3,270 yen. Canon Inc. (7751), the world’s biggest camera maker, gained 2.4 percent to 3,420 yen.
Companies that do business in China rose after a gauge of mainland manufacturing earlier this week showed a third month of expansion. A survey by HSBC Holdings Plc and Markit Economics released today showed the nation’s services industries expanded in December.
Fanuc gained 3.9 percent to 16,540 yen. Komatsu Ltd. (6301), a maker of construction machinery that gets about 14 percent of sales from China, jumped 4.9 percent to 2,290 yen.
Futures on the Standard & Poor’s 500 Index lost 0.1 percent today. The gauge slipped 0.2 percent in New York yesterday after minutes from a Federal Reserve meeting showed policy makers said they will probably end their $85 billion monthly bond-purchase program sometime in 2013.
The Topix has risen 23 percent since the government on Nov. 14 said it would call elections, carrying the gauge into a bull market on expectations the Liberal Democratic Party, which won last month’s poll, would call for more central bank stimulus. An advance of 20 percent or more from a low signals a bull market to some investors, while a decline of that magnitude signals a bear market.
Insurance companies advanced today on speculation the share rally will boost the value of their assets. T&D Holdings, Inc. increased 7.7 percent to 1,121 yen. Dai-ichi Life Insurance Co. (8750), Japan’s second-largest life insurer, climbed 6.8 percent to 128,100 yen. NKSJ Holdings Inc., the third-largest casualty insurer, rose 6.3 percent to 1,951 yen.
The Topix is trading for 18.3 times estimated earnings, compared with 13.1 times for the S&P 500 and 11.9 times for Stoxx Europe 600 Index.
The Nikkei 225’s 14-day Relative Strength Index, a measure of trading momentum, rose to 83.30 today. Some investors view a reading above 70 as a sign the market is overbought.
The Nikkei Stock Average Volatility Index (VNKY) slipped 2.2 percent to 21.95, indicating traders expect a swing of about 6.3 percent on the gauge over the next 30 days. Trading volume on the Nikkei 225 was about 31 percent above the 30-day average.
Among stocks that fell, Japan Exchange Group sank 9.4 percent to 3,895 yen on its trading debut on the Tokyo Stock Exchange. The company was previously listed as Osaka Securities on the Jasdaq market, where it gained 5.6 percent in the past month.
“Investors will probably re-evaluate the stock once they start to see the synergy from the merger,” said Naoki Fujiwara, chief fund manager at Shinkin Asset Management Co., which oversees about $6.3 billion. “Right now there’s not much news to buy on, as the shares already rose a lot on Jasdaq.”
Sharp Corp. (6753) dropped 2.6 percent to 295 yen after the Yomiuri newspaper reported on Jan. 1 that the loss-making television maker may raise 100 billion yen ($1.1 billion). The company is considering ways to increase capital, spokesman Atsushi Yoshida said, declining to give funding details.
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