Nikkei at four-month closing high as confidence spreads

By Elaine Lies

TOKYO (Reuters) - Japan's Nikkei stock average climbed 0.9 percent to a four-month closing peak on Thursday, led higher by growing market confidence symbolized by Sony Corp (6758.T: Quote, Profile, Research, Stock Buzz), which had its greatest one-day gain in nearly seven months after forecasting a bigger profit than expected.

Nippon Steel Corp (5401.T: Quote, Profile, Research, Stock Buzz) surged after a report that Toyota Motor Corp (7203.T: Quote, Profile, Research, Stock Buzz) has agreed with it and other top Japanese steelmakers to pay over 30 percent more for sheet steel, while bank shares, sold recently, also powered higher after a report that No. 2 bank Mizuho Financial Group (8411.T: Quote, Profile, Research, Stock Buzz) plans an effective 10-for-1 stock split. Exporters, boosted in early trade by a weaker yen, were still strong in the afternoon despite the dollar slipping back to under 105 yen, although many had trimmed gains.

"Sony's results are being taken very positively by the market, setting off expectations of more rises down the road, and this is working as a big overall plus psychologically," said Katsuhiko Kodama, a senior strategist at Toyo Securities.

But other market players said Sony was only one part of a larger picture.

"The earnings period is near its end now and there's growing reassurance because it wasn't as grim as feared," said Nagayuki Yamagishi, a strategist at Mitsubishi UFJ Securities.

After the close, Mizuho Financial Group (8411.T: Quote, Profile, Research, Stock Buzz) posted a 50 percent decline in full-year profit, hurt by heavy subprime losses at its brokerage unit, but forecast a rebound ahead.

In one sign of growing confidence in Japanese shares, a monthly poll of 191 international investors by Merrill Lynch found that the percentage of investors intending to increase their holdings of Japanese shares over the next year turned positive for the first time since August 2007. The poll added that the number of investors pessimistic on Japanese companies' earnings outlooks had fallen dramatically from 15 percent in April to 3 percent this month. Market players said that foreign hedge funds appeared to be active, as they had been earlier this week. Kodama, at Toyo Securities, also said that individual investors appeared to have stepped in to snap up banks and blue-chips.

The Nikkei .N225 was up 133.19 points at 14,251.74 after rising as far as 14,352.84 for its fourth straight day of gains, with profit-taking emerging around 14,350. It was the highest close since January 10.