Nikkei rises 1.5 pct as Fed's taper signals confidence in US economy

Wed Dec 18, 2013 9:02pm EST

* Nikkei may top 16,000 and end that level at year end -
    * Fed taper eases market uncertainty
    * JPMorgan and others sell futures to lock in profits from
Wed - traders

    By Ayai Tomisawa
    TOKYO, Dec 19 (Reuters) - Japan's Nikkei share average
jumped 1.5 percent on Thursday morning to within striking
distance of its year high, as global equity markets took the
glass half-full view after the U.S. Federal Reserve announced it
would start to unwind its historic stimulus.
    Tokyo stocks were also bolstered by a surge in the
dollar/yen to over five-year highs in the wake of the Fed
decision, underscoring the benefits of a weak currency for
Japan's export-reliant economy. 
    The Fed said it would reduce its monthly asset purchases by
$10 billion to $75 billion, while it also indicated that its key
interest rate would stay at rock bottom even longer than
previously promised. 
    In contrast to the U.S. central bank, the Bank of Japan is
committed to its massive asset-purchase program aimed at
sparking inflation and spurring long-term sustainable growth. 
    On the whole the Fed's move was seen as a vote of confidence
on the U.S. economy, as a run of upbeat data recently added to
signs that growth momentum is broadening.   
    "The Fed learned its lesson from May as it startled the
market by signalling a cut in its stimulus out of the blue,"
said a chief investment officer at a U.S. asset management firm,
referring to the global market confusion when emerging markets'
stocks and currencies tumbled on concerns that liquidity would
dry up.
     "The Fed made sure the impact would be limited this time by
saying it would keep the interest rate low, so it is
communicating with the market better than before." 
    The Nikkei added 233.30 points to 15,821.10 in
mid-morning trade, after rising as high as 15,879.75, a hair's
breath away from its May high of 15,942.60. The Nikkei has risen
for a third day.
    But with institutions, including JPMorgan, locking in
profits after buying futures on Wednesday, the Nikkei may lack
the extra momentum required to top its May high on Thursday,
traders said.
    The Topix gained 1.1 percent to 1,263.71, with all
of its 33 subsectors in positive territory.
    Analysts said investors were also relieved to see the
10-year U.S. Treasury yield stayed below 2.9 percent after the
Fed taper decision, given many had expected the yield to test
that level.
    "Fed's tapering is a symbolic event, but the market was
relieved that the impact from tapering would be limited, so
there is nothing more positive than this to the stock market,"
said Norihiro Fujito, a senior investment strategist at
Mitsubishi UFJ Morgan Stanley Securities.
    He sees the Nikkei reaching 16,000 and going further ahead
of that level by year-end.
    Bellwether exporters attracted buying as the greenback rose
to 104.37 yen, a level not seen since October 2008. 
    Panasonic Corp rose 3.6 percent, Honda Motor Co
 added 1.7 percent and Fanuc Corp surged 3.7
percent. A weaker yen lifts exporters' competitiveness abroad as
well as their profits overseas when repatriated.
    Brokerage firms were also changed higher, with Nomura
Holdings rising 2.1 percent and Daiwa Securities Group
<8601.T advancing 1.2 percent.
    The Nikkei is up more than 50 percent this year, driven by
Tokyo's aggressive fiscal and monetary stimulus aimed at pulling
the world's third-largest economy out of two decades of
stagnation. The benchmark is on track for its best yearly rise
since 1972.
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