Nikkei jumps on BOJ governor's early departure

Wed Feb 6, 2013 1:49am GMT

* Toyota hits 4-year high after hiking forecast
    * Shippers, steel and real estate strong

    By Sophie Knight
    TOKYO, Feb 6 (Reuters) - Japan's Nikkei average jumped 2.8
percent to a fresh 33-month high early on Wednesday after a
sharp fall in the yen on bets a decision by the central bank
governor to step down early will bring forward aggressive
monetary easing.
    Prime Minister Shinzo Abe has put the central bank under
relentless pressure to do more to drag Japan out of deflation
and made it clear he wants someone in the job who will be bolder
than the outgoing BOJ chief in loosening monetary policy.
 
    Currency-sensitive shares jumped. Toyota Motor Corp 
climbed 4.6 percent to its highest level since September 2008,
also supported by a hike in its full-year operating profit
guidance by 10 percent on a weaker yen and a firmer U.S. sales
forecast. 
    The Japanese currency plumbed a fresh 33-month low of 93.80
yen to the dollar on Wednesday morning.
    "The market's consensus is that it wants a BOJ governor who
shares the government's push to reflate the economy with
aggressive easing, and the news raised expectations for an
appointment of such governor," said Hiroichi Nishi, assistant
general manager at SMBC Nikko Securities.
    The Nikkei climbed 2.8 percent to 11,357.24, its highest
since April 15, 2010. If it tops 11,408.17, an increasingly
likely prospect according to market players, it will reach a
level not seen since October 2008, after the global financial
crisis kicked it off that year's high of 15,156.66.
    While all sectors moved higher, the stand-outs were those
set to benefit from a softer yen, with automakers Mazda Motor
Corp and Nissan Motor Co Ltd bounding up 4.8
and 4.6 percent, respectively.
    Although Japan's earning season has been relatively weak,
with 63 percent of the 99 Nikkei companies that have reported so
far missing analysts' estimates, according to Thomson Reuters
Starmine, investors are hoping that a more favourable exchange
rate for overseas revenues will boost future profits. 
    Shippers, highly sensitive to the general
strength of the economy, sailed up 5 percent, while the iron and
steel sector, weakened over the past year by fallings
steel prices, jumped 4 percent. The real estate sub-index
 advanced 3.2 percent.
    Bank of Japan Governor Masaaki Shirakawa said on Tuesday he
would step down together with his two deputies, three weeks
before the end of his five-year term. 
    "This is proof that the market is still running on
speculation rather than the facts at hand... the Abe effect is
creating something close to a bubble," said Norihiro Fujito,
senior investment strategist at Mitsubishi UFJ Morgan Stanley.
    "And yet I think the market could yet rise when they
announce the new governor's name, particularly if it makes an
asset purchase budget of 50 trillion yen ($535 billion) from the
BOJ more likely."
    Fujito singled out Kazumasa Iwata, a former deputy governor
to the BOJ and a vocal supporter of a 50 trillion yen fund, as
the most likely candidate. 
    Better-than-expected euro zone data also supported bullish
sentiment after political strife in Italy and Spain sent shivers
through the market on Tuesday. Markit's euro zone composite PMI,
seen as an indication of economic growth, climbed to a 10-month
high for January and was slightly above the preliminary reading.
    The broader Topix jumped 2.6 percent to 963.64 by
mid-morning.