Nikkei gains 2.0 pct on weak yen but headed to weekly loss

Fri Jan 25, 2013 3:31am GMT

* Nikkei nears 32-month high, Topix rises 1.7 pct
    * Nikkei down 0.7 pct this week, set to end 10-week winning
run
    * More upside expected in coming months - analyst

    By Ayai Tomisawa
    TOKYO, Jan 25 (Reuters) - Japan's Nikkei share average rose
on Friday as a sharp drop in the yen gave a boost to exporters
and raised expectations for upbeat earnings forecasts for the
next fiscal year beginning in April.
    The Nikkei was up 2.0 percent at 10,832.48 at the
midday break but is down 0.7 percent so far this week,
retreating from a 32-month high hit on Jan. 15 and on track to
snap a 10-week run of weekly gains that was the longest since
1987.
    The yen tumbled to 90.695 against the dollar early on
Friday, its lowest level since June 2010, and dropped to 121.32
against the euro, its lowest since April 2011, after comments by
a senior Japanese government official that the government has no
problem with the dollar hitting 100 yen.
    "Right now, trading cues are basically these two: currency
moves and quarterly earnings," said Hiroichi Nishi, assistant
general manager of equity research at SMBC Nikko Securities.    
     
    Analysts said investors are chasing the market higher, as
the underlying mood remains bullish on expectations that company
earnings will exceed forecasts that were based on conservative
foreign exchange assumptions.
    Exporters led the gains, with Panasonic Corp rising
2.0 percent, Toshiba Corp adding 5.3 percent and Nissan
Motor Co gaining 2.7 percent.
    A J.P. Morgan report said Toshiba's tie-up with General
Electric Co in the thermal power generation field,
announced on Thursday, would strengthen its growth outlook.
     Toyota Motor Corp rose 1.9 percent after it and
BMW AG said they will jointly research a lithium-air
battery expected to be more powerful than the lithium-ion
batteries used in many hybrid and electric vehicles, aiming to
cut development costs as global competition heats up.
 
    Financials rose, with Nomura Holdings Inc gaining
1.2 percent and Mitsubishi UFJ Financial Group adding
1.3 percent as investors sought high-beta stocks.
    
    MORE UPSIDE
    The Nikkei has gained about 25 percent since mid-November on
expectations that Japan's new prime minister, Shinzo Abe, will
pursue aggressive policies to tackle the country's prolonged
deflation, including pressuring the central bank for further
monetary easing.
    The market's gains stalled earlier this week after the Bank
of Japan said its open-ended commitment to buy assets would kick
in only next year, disappointing investors who had expected far
more aggressive easing measures.
    But analysts said there was further potential for gains in
the market, with investors looking for strong earnings forecasts
for the fiscal year ending in March 2014 when companies start
releasing full-year earnings reports in late April and May.
    The yen's steep decline has burnished the outlook for
Japanese stocks, prompting analysts to raise profit forecasts
for currency-sensitive exporters and foreign investors to plough
$17 billion into the market, the biggest monthly inflow since
2010. 
    "We can look forward to more good news from both the
domestic market and the global market for the coming months,"
said Nobuhiko Kuramochi, a strategist at Mizuho Securities.
    He said the Nikkei was likely to reach 11,150 if the yen
remains weaker than 90 to the dollar for a sustained period.
    "Speaking from a currency-stock correlation point of view,
our research showed that the Nikkei's level was around 10,041
when the yen traded around 85 yen to the dollar," Kuramochi
said.
    He added that signs of a U.S. economic recovery will also
likely serve as a tailwind for the Japanese market. 
    U.S. factory activity grew the most in nearly two years in
January and new claims for jobless benefits dropped to a
five-year low last week, giving surprisingly strong signals on
the economy. 
    The broader Topix added 1.7 percent to 912.44 in
active trade, with 1.76 billion shares changing hands, on track
to post full-day volume close to last week's daily average
volume of 3.73 billion shares.