Nikkei hits 21-month high, set for best annual gain in 7 years

Thu Dec 27, 2012 9:54pm EST

* Yen weakness boosts exporters
    * Nikkei up 23 percent this year
    * Yen falls 12.2 percent vs dollar
    * Nikkei rises 0.8 pct, Topix gains 0.6 pct

    By Dominic Lau
    TOKYO, Dec 28 (Reuters) - Japan's Nikkei average rose to a
21-month high on Friday, heading for its best yearly gain since
2005 as exporters were buoyed by a weaker yen on expectations of
aggressive monetary stimulus under new Prime Minister Shinzo
Abe.
    Export-focused firms leading the index higher included
Toyota Motor Corp, Honda Motor Co, Canon Inc
 and Nikon Corp, all up between 1.5 and 2.5
percent. Index heavyweight and industrial robot maker Fanuc Corp
 gained 1.6 percent.
    The Nikkei advanced 0.8 percent to 10,403.01 by the
midday break of its last trading day of the year, touching its
highest level since March 11, 2011 and shrugging off a slump in
Japan's factory output in November.
    "We expect the yen to hit 90, and the Nikkei to reach 11,000
as early as late January or early February," said Shun Maruyama,
chief Japan equity strategist at BNP Paribas.
    "The market is pricing in a new inflation target of 2
percent. However, the problem is how to achieve the target. The
market is focusing on what the BOJ will announce in its next
meeting."
    
    Maruyama said if the Bank of Japan fell short of market
expectations At its next meeting, investors would take profit.
The BOJ holds its next policy meeting on Jan. 21-22.
    The benchmark Nikkei has rallied 20.1 percent over the past
six and a half weeks, on speculation that Abe will pursue
policies to weaken the currency, which has hurt Japanese
exporters' competitiveness and their overseas earnings when
repatriated.
    The expectations had prompted foreign investors to turn net
buyers of Japanese equities last week for a sixth consecutive
week. They bought a net 764.9 billion yen ($8.9 billion) of
shares in the week through Dec. 15, the biggest net buying since
March 2011, data from the Ministry of Finance showed.
    The Nikkei is up 23 percent this year, on track for its best
yearly gain since 2005, while the Japanese currency has lost
12.2 percent against the greenback this year, and is set to post
its biggest annual loss since 2005. The yen hit a more than
two-year low of 86.64 to the dollar on Friday.
    The broader Topix index gained 0.6 percent to 859.26
after the morning session in relatively active trade, with
volume at 93 percent of its full daily average for the past 90
trading days.
    Toshiba Corp climbed 4.1 percent on media reports
that it is in talks with three parties to sell a portion of its
stake in its nuclear power unit Westinghouse. 
    Nippon Electric Glass Co, however, shed 3.4 percent
after the glassmaker cut its earning forecast for the nine-month
period through December, citing a price decline in glasses used
in flat panel displays.
A couple walks along the rough surf during sunset at Oahu's North Shore, December 26, 2013. REUTERS/Kevin Lamarque

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