Nikkei hits 4-week closing high on yen, earnings hopes

TOKYO (Reuters) - The Nikkei average hit its highest close in four weeks on Monday, lifted by exporters such as Honda Motor Co (7267.T) on a weaker yen, while Kawasaki Heavy (7012.T) jumped on a report of a high-speed rail project in China.

Banking shares such as Japan's top lender Mitsubishi UFJ Financial Group (8306.T) rose on short-covering, market players said, while Japan Airlines 9205.T gained after a report that a state-backed body will oversee its turnaround.

Shionogi (4507.T) jumped more than 3 percent after the U.S. government issued an emergency-use authorization for a new flu drug Shionogi has developed with U.S. drugmaker Biocryst Pharmaceuticals.

"A weaker yen and expectations that Japanese corporate earnings for the first half of the business year will be fairly solid are helping the market," said Soichiro Monji, chief strategist at Daiwa SB Investments.

"Gains still lack strength as active buying is scarce, though there's no big sell-off."

Investor remain cautious as Japan's earnings season heads into full swing later this week.

In light trade, the benchmark Nikkei .N225 climbed 0.8 percent or 79.63 points to 10,362.62, its highest finish since September 24.

The broader Topix .TOPX advanced 1 percent to 910.72.

"Important technical indicators for the Nikkei -- its 75-day and 25-day moving averages-- stand around 10,250, forming a very strong support line," said Kenichi Hirano, operating officer at Tachibana Securities.

The Nikkei gained 0.2 percent last week, with investors reluctant to actively take positions ahead of Japanese corporate earnings and a raft of economic indicators in Japan and the United States this week.

On Thursday, Japan will announce its industrial output data for September and the U.S. government is set to report its first estimate on third-quarter gross domestic product.

EXPORTERS STRONG

Konica Minolta Holdings Inc (4902.T) shot up 6.2 percent to 929 yen, with a rating upgrade from Credit Suisse and its setting of a higher target for costs cuts offsetting a downward earnings revision.

Among exporters, Honda advanced 3.4 percent to 2,900 yen and Toyota Motor Corp (7203.T) climbed 1.7 percent to 3,650 yen. Sony Corp (6758.T) added 1.7 percent to 2,715 yen.

The dollar was trading around 91.90 yen in Asia trade after rising to a one-month high of 92.23 yen earlier in the day. Many Japanese exporters have set their currency rate assumptions at 90-95 yen for the year to March.

Kawasaki Heavy gained 4.4 percent to 240 yen after the Nikkei business daily said it may gain licensing fees from a Qingdao railcar maker that won an order worth 45 billion yuan ($6.6 billion) to build railway cars for a high-speed link between Beijing and Shanghai.

JAL shares gained 2.6 percent to 117 yen, after opening lower.

The Nikkei business daily said the Japanese government plans to put a state-backed turnaround body in charge of the overhaul of the struggling airline, underlining the government's deeper involvement in the process.

"JAL's stock price moves appear to be due to short-term dealing --a bit like a game-- as market participants know the company is unlikely to go bankrupt as it's a 'national flag' carrier," said Fumiyuki Nakanishi, manager at SMBC Friend Securities.

A source close to the matter has said liabilities at JAL would exceed its assets by as much as $8.8 billion if it were liquidated, indicating the depth of the problem facing the airline as it seeks aid from banks and the state to avoid bankruptcy.

Bank stocks recouped some ground, with Mitsubishi UFJ gaining 2.2 percent to 470 yen.

"JAL remains in a tough situation, but its outlook is no longer full of uncertainty, prompting short-covering in banking shares," said Hirano at Tachibana Securities.

Among stocks that fell, Shin-Etsu Chemical Co (4063.T) slid 2 percent to 5,310 yen after it reported a 65 percent fall in first-half operating profit as silicon wafer demand contracted following the failures of chipmakers Qimonda QMNDQ.PK and Spansion SPSNQ.PK.

Chiyoda Corp (6366.T) plunged 12.6 percent to 694 yen after the plant engineering firm cut its full-year operating profit forecast by 87 percent, hit by additional costs booked for a project in Qatar.

The two stocks were the top drags on the Nikkei 225.

Some 1.7 billion shares changed hands on the Tokyo exchange's first section, below last week's daily average of 1.9 billion.

Advancing stocks outnumbered declining ones by more than 3 to 1.

(Editing by Edwina Gibbs)