Japan's Nikkei set to rise ahead of BOJ meeting

Tue May 21, 2013 7:13pm EDT

TOKYO, May 22 (Reuters) - Japan's Nikkei average is likely
to open higher on Wednesday, ahead of the outcome of the Bank of
Japan meeting, buoyed by the U.S. Dow Jones and S&P 500 indexes
closing at record highs on Federal Reserve officials'
reassurance on the central bank's stimulus programme.   
    The Nikkei is likely to trade between 15,350 and
15,550, strategists said, while Nikkei futures in Chicago closed at 15,485 on Tuesday, up 0.6 percent from the
Osaka close of 15,400.
    "The buying just doesn't stop," said Kenichi Hirano,
operating officer at Tachibana Securities. "Today, if the Nikkei
gets above 15,500, volatility could increase, trading could
become choppy, but with foreigners still buying Japanese shares,
the trend might still point upward for a while."
    Japanese pension funds are not major buyers but some of them
are no longer selling into rallies, Hirano added.
    The BOJ is expected to stand pat on monetary policy despite
jitters over the recent volatility in bond markets, hoping it
can prevent a renewed spike in yields by fine-tuning market
operations. 
    In the United States, two senior Fed officials on Tuesday
played down the chances that the central bank would signal a
readiness to reduce its bond buying at its meeting next month,
dampening speculation the Fed's ultra-easy monetary policy might
end soon and boosting stocks. 
    On Tuesday, the Nikkei added 0.1 percent to 15,381.02, its
highest closing level since December 2007. The broader Topix
 index inched up 0.1 percent to 1,270.39. 
    The benchmark Nikkei has rallied 48 percent this year, and
it has risen more than 8 percent since May 9, when the dollar
broke above the 100-yen mark.
    "Japan is rapidly becoming a big momentum trade and thus
liable to volatility; trading a momentum market has to be a case
of trying to stay long quality rather than chasing beta," Mark
Tinker, manager at AXA Framlington Global Opportunities Fund,
wrote in a note.
    "The near term risks we see are largely associated with the
current behaviour of the Japanese government bond market."
                         
> Dow, S&P ends at records on Fed officials' reassurance    
> Dollar dips vs euro before Bernanke testimony, yen slips 
> Treasuries gain on dovish Fed speakers                   
> Gold cuts losses as euro firms before Bernanke testimony 
> Oil falls on rising U.S. gasoline stocks                 

    STOCKS TO WATCH
    --TAKEDA PHARMACEUTICAL CO LTD 
    Amag Pharmaceuticals Inc said its marketing partner
in Switzerland, Takeda Pharmaceutical, is recalling a batch of
Amag's anaemia drug, Rienso, because of a death and several
cases of hypersensitivity. 
    --SONY CORP 
    Sony is considering evaluating a proposal from top
shareholder Third Point LLC to spin off part of its movie and
music business, the Nikkei newspaper said. 
    --DENSO CORP 
    Two executives at Denso have agreed to plead guilty to
conspiring to fix prices of electronic auto parts sold to Toyota
Motor Corp and will cooperate with an ongoing criminal
investigation, the U.S. Justice Department said on Tuesday.
 
    --HONDA MOTOR CO LTD 
    Honda's small passenger jet will not be licensed to fly by
authorities in the United States until the second half of 2014,
a year later than the company originally planned, the company
said on Tuesday.