Nikkei tops 18,000, first time in nearly 7 years

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By Aiko Hayashi

TOKYO, Feb 22 (Reuters) - The Nikkei average .N225 gained 1.07 percent to top 18,000 for the first time in nearly seven years on Thursday, with exporters such as Canon Inc. (7751.T) rising on a soft yen after the central bank raised interest rates but said further increases would be gradual.

The BOJ lifted its main interest rate by a quarter percentage point to 0.5 percent on Wednesday, the highest in more than a decade but still far below 5.25 percent in the United States and 3.5 percent in the euro zone.

Investors are likely to keep picking up shares of steel firms on expected industry consolidation and as they are seen as still having room to rise, said Katsuhiko Kodama, a senior strategist at Toyo Securities.

"The Nikkei could aim for around 19,000 towards April, boosted by possible upward revisions of corporate earnings," he said.

In New York, the dollar rose nearly 0.8 percent against the yen on Wednesday to trade at 120.88 yen JPY= as the Japanese currency gave up almost all its gains of the past week.

The Nikkei was up 191.09 points at 18,104.30, its highest since May 2000. On Wednesday the technology-laced benchmark shed 0.14 percent to 17,913.21.

The broader TOPIX index rose 0.95 percent to 1,804.29 after hitting its highest since November 1991.

Trade jumped to 1.6 billion shares changing hands on the Tokyo exchange's first section by midday. That compares with last week's morning average of 1.1 billion shares.

Advancing shares outnumbered decliners by a ratio of nearly three to one.

EXPORTERS GAIN, STEEL SHARES STILL HOT

Among blue-chip exporters, Canon gained 1.4 percent to 6,560 yen, while Advantest Corp. (6857.T) added 1.6 percent to 5,680 yen and Honda Motor Co. Ltd. (7267.T) was up 0.9 percent at 4,660 yen.

A weaker yen is a boon to firms that make the bulk of sales abroad because it boosts profits when earnings are brought home.

TDK Corp. (6762.T) rose 1.9 percent to 10,250 yen and Tabuchi Electric Co. Ltd. (6624.OS) was glutted with buy orders coming at 234 yen, up 27.2 percent from Wednesday's close.

Electronics parts maker TDK said on Wednesday it would spend about $7 million to take a minority stake in parts maker Tabuchi Electric to help expand its power unit business. [ID:nT135020]

Shares of steel makers rose with Sumitomo Metal Industries Ltd. (5405.T) up 2.1 percent at 627 yen.

Among other gainers, real estate shares such as Mitsubishi Estate Co. Ltd. (8802.T) rose following the BOJ rate hike. Mitsubishi added 2.7 percent to reach a a record 3,790 yen.

"Real estate shares usually react negatively to a rate raise, but investors are taking the move as a sign of a strong economy and the end of deflation," said Kenichi Hirano, operating officer at Tachibana Securities.

Sumitomo Metal Mining Co. Ltd. (5713.T), Japan's top gold producer, jumped 5.8 percent to 1,987 yen after dollar-based cash gold rallied to a nine-month high the previous day. [ID:nT222202]

Shares in securities brokers including Nomura Holdings Inc. (8604.T) and Daiwa Securities Group Inc. (8601.T) rose after the Nikkei topped 18,000 for the first time since May 2000.

Japan's largest brokerage Nomura gained 4.2 percent to 2,750 yen, while second-ranked Daiwa added 3.3 percent to 1,616 yen.