Nikkei gains 2 percent as tech shares surge on U.S. hopes

By Elaine Lies

TOKYO (Reuters) - Japan's Nikkei share average climbed 2 percent on Wednesday, touching a two-month high as tech shares such as Kyocera Corp powered up on hopes for a U.S. economic stimulus package, while exporters rose on a weaker yen.

Carmakers climbed, with Honda Motor Co surging more than 9 percent as investors continued to buy up the beaten-down sector, one of the poorest performers in 2008.

The Nikkei business daily reported that Japan's government will seek to scrap capital gains taxes for foreigners investing in Japanese companies through funds, which market players said could be having some impact.

But many also said gains might be limited by investor moves to lock in profits at the highs out of a sense that the Nikkei, which has risen for the past six trading days, may be overheated.

"Though the market may be sustained by hopes for the Obama economic plan, around the time he takes office we'll start to see a lot of company results coming out, and things could start to get tough," said Takashi Ushio, head of the investment strategy division at Marusan Securities.

"People say the market has factored in poor results, with something like 20-30 percent of firms likely to show losses, but what if that number rises to 40 percent? It's anyone's guess if that's been factored in."

The dollar on Tuesday hit its highest against the yen since December 1, partly on expectations that a stimulus package planned by U.S. President-elect Barack Obama will help the world's largest economy emerge from recession sooner than other industrialized nations.

Others said risk appetite may be recovering a bit as investors take a longer-term view, especially on the United States.

"The United States certainly has a lot of economic problems but they seem to be tackling them, whereas Japan doesn't seem to be doing anything," said Koichi Ogawa, chief portfolio manager at Daiwa SB Investments.

"Though the immediate future seems pretty dark people are now looking toward 2010 and buying on expectations of recovery."

The benchmark Nikkei gained 182.31 points to 9,263.15 by the midday break after earlier rising as far as 9,325.35, its highest since November 6. The broader Topix gained 1.7 percent to 890.69.

CARMAKERS CLIMB, TECHS GAIN

Some in the market said gains could be powered by a slow return of foreign investors, noting that hedge funds -- relentless sellers last year -- might be starting to get back in.

According to orders placed before the start of trade, foreign brokers were set to be net buyers of Japanese stocks to the tune of 14 million shares.

Hopes for a U.S. economic recovery were particularly at play in the case of carmakers, helping many beaten-down shares extend the sharp gains made earlier this week.