Nikkei seen testing 20-month high as yen weakens

Wed Dec 26, 2012 11:10pm GMT

TOKYO, Dec 27 (Reuters) - The Nikkei average is expected to
open stronger and test a 20-month high on Thursday, led by
exporters, as the new Japanese prime minister's vow to battle
deflation and a strong currency sent the yen to a more than
two-year low against the dollar.
    Separately, Finance Minister Taro Aso said Prime Minister
Shinzo Abe has ordered him to compile a stimulus package without
adhering to a previously agreed cap on new bond issuance,
signalling a more aggressive policy to kick-start the ailing
economy.
    The Nikkei is likely to trade between 10,250 and
10,400, strategists said, while Nikkei futures in Chicago closed at 10,330 on Wednesday, up 0.9 percent from the
Osaka close of 10,240.
    "The Nikkei will test the year-to-date's high. Nikkei
futures already cleared above 10,300 in yesterday's night
session," said Takashi Hiroki, chief strategist at Monex Inc. 
"The yen depreciation continues."
    Hiroki said expectations of further gains in the new year
would likely deter investors from sharp profit-taking on Friday,
the last trading day of the year.
    The yen was quoted at 85.50 to the dollar on Thursday after
hitting a more than two-year low of 85.735 yen on Wednesday.
    On Wednesday, the Nikkei climbed 1.4 percent to 10,230.36,
hitting a nine-month high and coming close to this year's high
of 10,255.15 reached in late March. The broader Topix 
index advanced 1.2 percent to 847.71.
    The benchmark Nikkei has rallied 18.1 percent over the past
six weeks, taking the year-to-date gain for the Nikkei to 21
percent, outpacing a 12.9 percent rise in the U.S. S&P 500
 and a 14.7 percent gain in the pan-European STOXX Europe
600.
    Japanese equities carry a 12-month forward price-to-earnings
ratio of 12.6, slightly cheaper than the S&P 500's 12.8 but more
expensive than STOXX Europe 600's 11.5, data from Thomson
Reuters Datastream showed.
        
> Wall St drops for 3rd day, led by retailers               
> Yen falls sharply as Japan's Abe vows to weaken it       
> Treasuries gain as U.S. fiscal deadline approaches       
> Gold up in thin post-Christmas trade; US budget in focus 
> Oil jumps to 9-week high on U.S. fiscal talks, technicals 
    
    STOCKS TO WATCH
    -- TOYOTA MOTOR CORP 
    Toyota has agreed to pay as much as $1.4 billion to settle
U.S. litigation over claims that its vehicles suddenly and
unintentionally accelerated, according to court filings made
public on Wednesday. 
    -- MITSUBISHI UFJ FINANCIAL GROUP 
    VietinBank, Vietnam's second-biggest partly private
lender by assets, is set to sign a deal to sell shares to Bank
of Tokyo-Mitsubishi UFJ, making the Japanese lender its
strategic investor, a VietinBank official said on Wednesday.
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