Japan's Nikkei seen rising strongly in 2013 -Reuters poll

Thu Dec 13, 2012 3:14pm GMT

Related Topics

* For poll data see

* Hopes for easy policy, softer yen seen boosting index

* Market expects resolution of U.S. fiscal cliff

* Exporters, financials, real estate seen growth sectors

* Risks include China slowdown, LDP defeat in upper house

By Ayai Tomisawa

TOKYO, Dec 13 (Reuters) - Japan's Nikkei will probably see double-digit gains next year as easy monetary policy weakens the yen and a resolution of U.S. fiscal problems lifts sentiment, a Reuters poll found.

The Nikkei is expected to rise to 11,000 by the end of 2013, compared with Wednesday's close of 9,581.46, according to the median forecast of 17 analysts polled by Reuters in the past week.

Market observers said investors would continue buying into exporters, whose earnings are expected to improve in the coming fiscal year, helped by a weaker yen.

The yen has weakened since Shinzo Abe, the leader of the main opposition Liberal Democratic Party who is expected to win a Dec. 16 general election, called for the Bank of Japan to beat persistent deflation and a strong yen. His proposals include "unlimited easing" and setting an inflation target of 2 percent.

The yen was quoted at 82.89 to the dollar on Wednesday, not far from its 7-1/2-month low of 82.84 touched on Nov. 22.

Since then the Nikkei has risen 2 percent, taking its year-to-date gain to 13 percent, narrowing the gap with the U.S. S&P 500's 14 percent rise this year and the pan-European STOXX Europe 600's 15 percent gain.

"Investors have poured money into the Japanese market on the assumption that there will be monetary easing by the central bank next year. This rally should continue through mid-next year," said Shun Maruyama, chief strategist at BNP Paribas.

By mid-2013, the Nikkei is expected to reach 10,500.

Monetary policy is a big election issue as politicians look to end deflation and keep the world's third-largest economy from sliding deeper into recession.

Traders see automotive, electronics, financials and real estate as sectors to watch, adding that appetite for materials and construction stocks such as cement makers could rise on hopes for more public works spending under a LDP-led government.

Contributing to the positive outlook for the Japanese market, analysts expect that a potential fiscal crisis of automatic tax hikes and spending cuts in the United States will eventually be avoided.

RISKS TO NOTE

Japan has seen a series of credit downgrades over concerns it was not doing enough to curb its debt burden, the world's largest at twice the value of its annual economic output.

"A weak yen is positive for stocks in general. But just like 'too much medicine' can cause damage to a sick person's body, excessive easing will cause damage to the country's financial health," said Kenichi Hirano, at Tachibana Securities.

Other market participants also remained wary about risks including an abrupt slowdown in China and the reigniting of concerns about the euro zone debt crisis.

Reflecting such uncertainties, forecasts for the Nikkei ranged from 9,500 to 13,500 at the end of next year.

Others noted that tension may rise towards next summer, when the upper house election is scheduled.

"The bigger the hope is for the next government, the more disappointment the market may see if the LDP's 'manifesto' isn't achieved," said Norihiro Fujito, senior investment strategist at Mitsubishi UFJ Morgan Stanley Securities. (Additional polling by Ashrith Doddi and Namrata Anchan; Editing by Helen Massy-Beresford)

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