Nikkei vaults 21-mth high, heads for best year gain since 2005

Fri Dec 28, 2012 1:15am GMT

* Nikkei rises 0.9 pct, Topix gains 0.5 pct
    * Yen weakness boosts exporters, shrugging off weak data
    * Nikkei up 23.2 pct this year, yen falls 12.4 pct vs dollar

    By Dominic Lau
    TOKYO, Dec 28 (Reuters) - Japan's Nikkei average rose to a
21-month high on Friday, heading for its best yearly gain since
2005, as exporters were buoyed by a weaker yen on expectations
of aggressive monetary stimulus under new Prime Minister Shinzo
Abe.
    Export-focused firms leading the index higher included
Toyota Motor Corp, Honda Motor Co, Canon Inc
 and Nikon Corp, up between 1.2 and 2.4
percent.
    Index heavyweight and industrial robot maker Fanuc Corp
 gained 1.7 percent. 
    The Nikkei advanced 0.9 percent to 10,412.73 in
mid-morning of its last trading day of the year, touching its
highest level since March 11, 2011 and shrugging off a slump in
Japan's factory output in November.
    "We expect the yen to hit 90, and the Nikkei to reach 11,000
as early as late January or early February," said Shun Maruyama,
chief Japan equity strategist at BNP Paribas.
    "The market is pricing in a new inflation target of 2
percent. However, the problem is how to achieve the target. The
market is focusing on what the BOJ will announce in its next
meeting."
    Maruyama said if the Bank of Japan, which is to hold its
next policy meeting on Jan. 21-22, fell short of market
expectations, investors would take profit.
    The benchmark Nikkei has rallied 20.2 percent over the past
6-1/2 weeks, on speculation that Abe will pursue policies to
weaken the currency, which has hurt Japanese exporters'
competitiveness and their overseas earnings when repatriated.
    
    The Nikkei is up 23.2 percent this year, on track for its
best yearly gain since 2005, while the Japanese currency has
lost 12.4 percent against the greenback this year, and is set to
post its biggest annual loss since 2005.      
    The yen hit a more than two-year low of 86.64 to the dollar
on Friday.
    The broader Topix index gained 0.5 percent to
858.00.
    Nippon Electric Glass Co, however, shed 3.5 percent
after the glassmaker cut its earning forecast for the nine-month
period through December, citing a price decline in glasses used
in flat panel displays.
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