Nikkei hits 23-month high on Abe's BOJ comments, Fast Retailing

Thu Jan 10, 2013 10:09pm EST

* Nikkei highest since Feb 2011
    * Market set to post high volume over 4.0 bln shares
    * Fast Retailing heavily weighted, accounting 1/3 of gains
    * Abe seen more committed to economy - banker

    By Ayai Tomisawa
    TOKYO, Jan 11 (Reuters) - Japan's Nikkei share average rose
to a 23-month high on Friday, with exporters gaining on a weaker
yen after Prime Minister Shinzo Abe was quoted as saying the
central bank should consider maximising employment as part of
its mandate.
    Top-weighted gainer Fast Retailing Co rose 4.2
percent after the operator of casual clothing chain Uniqlo
raised its earnings guidance for the business year ending
August.
    By the midday break, the Nikkei had added 0.8
percent to 10,780.45 after rising as high as 1.7 percent to
10,830.43, the highest level since February 2011.
    Index heavyweight Fast Retailing attributed 38 positive
pionts to the Nikkei, which rose 127.81 points by the midday
break.
    Exporters led the gains, with Toyota Motor Corp 
rising 0.8 percent, Honda Motor Co advancing 0.9
percent, and Nikon Corp adding 2.7 percent.
    Abe was quoted by the Nikkei newspaper saying that Japan has
lost competitiveness because of the strong currency and it was
up to both the government and the BOJ to reverse the yen's gains
for the sake of the economy. 
    "I want the BOJ to feel responsible for the underlying
economy," Abe was quoted in the Nikkei newspaper. "I want the
BOJ to keep maximising employment at the forefront of its
thoughts."
    Some analysts said that Abe had gone too far suggesting a
restriction of the central bank's independence. But others said 
Abe's comments in the Nikkei reminded the market that the
government can override rejections of bills by the upper house
after winning an overwhelming majority of seats in the lower
house election in December.
    "Abe is seen seriously committed to making the economy
better as he is becoming more detailed, and investors are
feeling it is possible under his government," said Kyoya
Okazawa, head of global equities at BNP Paribas. 
    "While most macro funds have finished allocating Japan
shares to their portfolios by the end of the year, we are
getting inquiries from long-only funds which intend to pick up
Japanese stocks on fundamentals."
    The broader Topix index climbed 0.9 percent to
897.30 in active trade, with 2.05 billion shares changing hands
before the break, suggesting that volume may top 4.0 billion
shares by the close.
    On Thursday, the market logged 4.17 billion shares, the 
largest volume since March 2011.
    Friday's advances took the Nikkei deep into "overbought"
territory. Its 14-day relative strength index stood at 78.05,
above the 70-mark which is deemed overbought and often indicates
the market is ripe for a correction in the near term.
    "Investors are already aware that the market is overheated.
But even with such caution, they are ready to add more Japanese
shares to their portfolios," said Yutaka Miura, a senior
technical analyst at Mizuho Securities.
    But he added that buying could stall if the yen weakens 
very quickly, such as hitting 90 yen to the dollar on the day.
The dollar last traded at 89.17 yen, its highest since
June 2010.
    "A weak yen is generally positive for Japanese exporters,
but a steep drop from the current level may make them cautious,"
Miura said, adding that investors may also be wary of taking a
large bet before a three-day weekend.
    Markets will be closed on Monday in Japan for a public
holiday.
    The yen has been weakening since Abe called on the Bank of
Japan in mid-November to adopt a bolder policy to revitalise the
economy, including setting an inflation target of 2 percent. The
Nikkei has since rallied nearly 25 percent.
     Sharp Corp surged 9.6 percent to 321 yen, hitting
a two-week high after the Asahi newspaper said Mizuho Corporate
Bank and Bank of Tokyo-Mitsubishi UFJ are considering providing
additional loans to the struggling TV maker.
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