Nikkei hits two-week high on weaker yen, fund inflows

 * BOJ ETF purchases lending support to market -analyst
 * Foreign buying weaker as nuclear outcome, fundamentals
unclear-analyst
 * Electric and gas, banking shares down on nuclear woes
 * Hitachi surges on plant restart
 By Antoni Slodkowski	
 TOKYO, March 30 (Reuters) - Japan's Nikkei stock average
climbed 2.6 percent, hitting its highest level since a
post-quake panic sell-off as the yen softened against the
dollar, but investors said the gains may be short-lived as
bargain-hunting by foreigners peters out.	
 Market players also said the Bank of Japan's purchases of
exchange-traded funds under an asset purchase programme adopted
to bolster the economy was lending some support to the market
ahead of the business year-end on Thursday.	
 Inflows from passive funds and year-end window dressing by
institutional investors were also cited as reasons that pushed
the Nikkei considerably higher in afternoon trade.	
 But now that the benchmark has regained more than
half of the ground it lost in the post-quake rout, foreign funds
are buying less aggressively.	
 "Foreigners have stopped piling into shares on dips, and are
now mostly sidelined, waiting for more information on
fundamentals and further developments at the nuclear plant,"
said Hideyuki Ishiguro, a supervisor at Okasan Securities in
Tokyo.  	
 The Nikkei ended the day up 2.6 percent,
or 249.71 points, to 9,708.79. The broader Topix index 
advanced 1.9 percent to 866.09.	
 A stronger dollar lifted machinery stocks, electronics
makers and post-quake underperformers like Nissan Motor
 , which jumped 3.8 percent. Nissan has fallen more than
10.4 percent since the earthquake and tsunami hit northeast
Japan more than two weeks ago.	
 Both Nissan and Toyota Motor Corp , which have lost
a substantial amount of domestic production due to disruptions
in their supply chains, were among the most actively traded
shares by turnover on the Tokyo stock exchange's main board.	
 Tokyo Electric Power dropped another 18 percent,
adding to a slide to a 47-year low a day earlier as the
government pondered whether to nationalise the operator of a
stricken nuclear plant.[ID:nL3E7EU01N]	
"We believe the stock could go to zero," an executive at a
hedge fund with $1 billion invested in Asia told Reuters on
condition he was not identified. His fund he said has been
buying Tokyo Electric's debt because "we think the Japanese
government will guarantee or nationalise it".   	
 The utility's credit default swaps have fallen sharply in
the past few days, having hit a record high around 475 basis
points on Monday. Still, the cost of insuring its debt against
default is around 378 , compared to 40 basis
points before the quake.	
 	
 	
 BANKS LOSE	
 Banking stocks also felt Tokyo Electric's pain, slumping on
worries about their loans to the company.	
 "You have to look at all the banks that are lending to the
company. It's obvious that investors are going to look at their
situation with a huge dose of scepticism," said Norihiro Fujito,
senior investment strategist at Mitsubishi UFJ Morgan Stanley
Securities.	
 The banking sector , down 12.3 percent since the
quake, was the second weakest performer on Wednesday, losing 0.6
percent. Mizuho Financial Group , also facing an
inspection by financial authorities after it suffered computer
system troubles, fell 2.1 percent to 137 yen.	
 Japanese shares have shed about 7 percent since the March 11
earthquake and tsunami, and a subsequent nuclear safety crisis,
triggered the biggest two-day rout in the market since 1987. In
contrast, the MSCI index of Asian shares outside Japan
 has gained 4.7 percent.	
 Domestic fund managers warned the Nikkei faced more downside
risk around May.	
 "This is when firms will publish their earnings forecasts
which will seriously sour the market's mood," said Hiroaki
Osakabe, a fund manager at Chibagin Asset Management. 	
 "Analysts may put out reports beforehand, but it will be
very hard to fully rely on them and price in the quake damage,
so the potential declines could be very big."	
 The dollar rose as a steady rise in U.S. yields gained
traction this week after several Federal Reserve policymakers
said the central bank would have to start tightening monetary
policy soon to avoid inflation.	
 Shares of Hitachi Ltd , soared 8.7 percent to 437
yen in heavy trade after the electronics giant had partially
resumed operations at its biggest factory complex with output
expected to return to pre-disaster levels next month.
(Additional reporting by Natsuko Waki and Chikafumi Hodo;
Editing by Edwina Gibbs and Edmund Klamann)	
 	
 	
	
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Nikkei hits two-week high on weaker yen, fund inflows