Nikkei reverses earlier losses as yen resumes weakness

Tue Jan 8, 2013 9:49pm EST

* Nikkei rises 0.5 pct, Topix up 0.4 pct
    * Exporters rebound as yen reverses gains to trade lower vs
dollar
    * 7-Eleven parent up 1.7 pct after Q3 profit gains

    By Dominic Lau
    TOKYO, Jan 9 (Reuters) - Japan's Nikkei average reversed
earlier losses to trade higher on Wednesday, as a halt in the
yen rebound prompted investors to buy shares of
currency-sensitive exporters.
    The Nikkei has rallied nearly 22 percent over the past two
months, led by exporters as the yen weakened after new Prime
Minister Shinzo Abe called on the central bank to adopt an
aggressive monetary policy to energise the ailing economy,
including setting an inflation target of 2 percent.
    The Bank of Japan will consider easing monetary policy again
this month as it eyes doubling its inflation target, sources
told Reuters, as weakness in the economy threatens to delay the
country in getting out of deflation. 
    Any easing will likely take the form of another increase in
the BOJ's 101 trillion yen ($1.2 trillion) asset buying and
lending programme, mostly for purchases of government bonds and
treasury discount bills, sources familiar with its thinking say.
    The Nikkei gained 0.5 percent to 10,559.24 by the
midday break on Wednesday, breaching above its five-day moving
average at 10,549.92, after trading as low as 10,398.61 earlier
in the session.
    Wednesday's gain took the Nikkei's 14-day relative strength
index to 74.1, above the 70-mark which is considered overbought
and often signals a near-term pull back.    
    "It's because of forex, totally. 100 percent," said Kenichi
Hirano, market analyst at Tachibana Securities, referring to the
rebound in the Nikkei.
    "As FX is traded in tight range, the Nikkei average is
likely to be traded in range, probably around 10,500."
    The yen was down 0.5 percent at 87.455 to the dollar on
Wednesday after rising 0.9 percent in the previous session, its
second day of gains.
    Exporters reversing early losses included Toyota Motor Corp
, Honda Motor Co, Nikon Corp and
Daikin Industries, up between 0.6 and 1.4 percent.
    But Canon Inc and Panasonic Corp remained
weak, down 1.8 and 1.4 percent respectively.
    The rally in Japanese equities has pushed up their
valuations, with the 12-month forward price-to-earnings ratio to
13, ahead of the U.S. S&P 500's 12.7 and the pan-European
STOXX Europe 600's 11.5, according to Thomson Reuters
Datastream.    
    Japan's broader Topix rose 0.4 percent to 875.66 in
active trade on Wednesday morning, with volume hitting its full
daily average for the past 90 trading days.
    Other notable gainers included Seven & I Holdings Co
, which advanced 1.7 percent after its quarterly
operating profit rose 4.8 percent as higher profits from its
core 7-Eleven stores were supported by stronger income figures
at other retail formats.
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