Nikkei hits 7-month high on weaker yen

By Antoni Slodkowski and Ayai Tomisawa

TOKYO (BestGrowthStock) – Japan’s Nikkei ended 0.9 percent higher on Wednesday after hitting its highest intraday level in almost seven months, as a proposed extension in U.S. tax cuts boosted the dollar against the yen and lifted exporters’ shares.

The U.S. currency rose to its highest against the yen in nearly three months on Tuesday after U.S. President Barack Obama’s proposed extension triggered higher Treasury yields.

Foreign fund operators were keen on investing in lagging Tokyo equities but the benchmark Nikkei’s advance was limited ahead of the settlement of futures and options prices on Friday, analysts said.

“The dollar/yen rate now stands at well over 83 yen, and that’s pretty much the biggest positive factor supporting stocks today,” said Kenichi Hirano, operating officer at Tachibana Securities.

The benchmark Nikkei (.N225: ) rose 91.23 points to close at 10,232.33. At one point in the morning, the index rose as high as 10,258.90, its highest since May 18.

The broader Topix index (.TOPX: ) gained 0.9 percent to 887.39.

“Unless the Nikkei comfortably stays above 10,250 for a while, the index will probably see resistance around the current (10,200) level,” said Yutaka Yoshino, chief technical analyst at Nikko Cordial Securities. “If it stays above 10,250, the next target will be around 10,380.”

In relatively active trading, analysts said foreign funds were seen selling JGB futures and buying Nikkei futures, helping to boost the cash market’s volume.

Trading volume reached 1.93 billion shares on the Tokyo exchange’s first section, slightly exceeding the previous day’s 1.73 billion and last week’s daily average of 1.8 billion.

Advancing issues outnumbered decliners more than four to one.

Arbitrage activity as investors bought Nikkei futures and sold JGB futures may have exaggerated falls in JGB prices while providing overall support to Japanese shares, said Masaru Hamasaki, a senior strategist at Toyota Asset Management.

EXPORTERS LEAD

Major exporters led the advance with Sony Corp (6758.T: ) adding 1.9 percent to 3,040 yen and earth-moving equipment maker Hitachi Construction Machinery Co Ltd (6305.T: ) gaining 1.4 percent to 2,000 yen.

Silicon wafer maker Sumco Corp (3436.T: ) tumbled 9.6 percent to 1,211 yen on 3.9 times its 30-day average volume after the company said it expected a net loss of 66 billion yen ($790 million) for the year to January 2011, compared with its previous forecast of a 12 billion yen loss.

Social networking site DeNA Co (2432.T: ) tumbled 6 percent to 2,538 yen on news that the Japan Fair Trade Commission was investigating the operator of the popular Mobage-town mobile game site on suspicion that it had requested software developers not to provide game software to its rival GREE Inc.

The Nikkei has rallied almost 12 percent since the beginning of November, with foreigners shifting funds back to Tokyo after U.S. monetary easing lifted expectations of more liquidity in financial markets.

“The market could also be overheating after rallies since early November but foreign investors are still keen to pour their money into Japanese shares,” said Takashi Ohba, senior strategist at Okasan Securities.

For the year to date, the Nikkei is still down 3 percent, compared with a rise of more than 11 percent in the MSCI index for Asian stocks, excluding Japan (.MIAPJ0000PUS: ).

The Nikkei newspaper reported that Japan’s Prime Minister Naoto Kan had instructed the finance minister to realize a cut of 5 percentage points in the effective corporate tax rate from fiscal year 2011, deflecting calls for a more modest reduction.

Government spokesman Yoshito Sengoku said he was unaware of such an order but added that Kan could issue one in the future.

Such a move would be seen as positive by the market, although investors remained doubtful whether the cuts could be implemented.

($1=83.50 Yen)

(Additional reporting by Chikafumi Hodo; Editing by Edmund Klamann)

Nikkei hits 7-month high on weaker yen