* MSCI Asia ex-Japan little changed on low trading volumes
* Japan's new PM Abe sworn in
* Yen at 20-month low vs dollar, hoists Nikkei to 9-mth high
* European markets closed, U.S. to resume trading
By Chikako Mogi
TOKYO, Dec 26 The yen fell to a 20-month low
against the dollar on Wednesday, buoying the benchmark Nikkei
stock average to nine-month highs, as Japan swore in a new prime
minister eager to pursue drastic stimulus steps to drive the
country's economy out of deflation.
Asian shares and other assets were capped in thin holiday
trade, with investors focusing on the fate of U.S. negotiations
to avert a budget crunch looming at the end of the year.
Markets in Singapore, Malaysia, Indonesia
, the Philippines and South Korea reopened
on Wednesday after closing on Tuesday for the Christmas holiday.
Hong Kong and Australia remain closed on Wednesday. Europe
also will not trade, but U.S. markets reopen later in the day.
MSCI's broadest index of Asia-Pacific shares outside Japan
was little changed. Shanghai shares were
flat, but stayed in positive territory on the year after a 2.5
percent jump on Tuesday erased 2012 losses. It is set for a
first annual gain in three years. South Korean shares
ended nearly flat.
Shinzo Abe, whose party won a landslide victory in an
election earlier this month, was elected Japan's premier on
Wednesday. Abe, who is expected to appoint his cabinet later
Wednesday, is calling for a mix of aggressive monetary policy
easing and big fiscal spending to beat deflation and rein in the
He has kept up pressure on the Bank of Japan to be more
drastic and adopt a 2 percent inflation target to beat
deep-rooted deflation, pushing the yen to a 20-month low of
85.38 yen on trading platform EBS on Wednesday. Traders
eyed the dollar's 2011 high of 85.53 yen as the next target.
The euro rose as high as 112.55 yen on EBS, just
below its 16-month high of 112.59 yen hit on Dec. 19.
The weaker yen has bolstered hopes for better earnings from
Japanese companies and underpinned the Nikkei, which has gained
some 18 percent since mid-November when the election was
scheduled, fuelling expectations for Abe's party to win. The yen
has lost nearly 8 percent against the dollar in the same period.
The Nikkei closed at a nine-month high with a 1.5
"Most foreign funds have added Japanese shares and there are
fewer participants today, but there still is a reason for the
Nikkei to rise," said Hideyuki Okoshi, general manager at
Chibagin Securities. "Not only exporters but investors are
buying other stocks which could benefit under the new
Japanese government debt prices fell, with the 10-year bond
futures hitting a three-month low of 143.65 in active
trade. Ten-year JGB yields rose 1.5 basis points
to 0.780 percent, matching a six-week high hit on Dec. 19.
"We continue to see equities going high, so the pressure is
on the long end of the JGB curve. For the short end of the
curve, we continue to see the BOJ ease aggressively, so there is
no change in that," said Tadashi Matsukawa, head of Japan fixed
income at PineBridge Investments.
Minutes of the BOJ's policy-setting meeting in November,
released on Wednesday, showed that some board members said the
central bank must act decisively, without ruling out any policy
options, if the outlook for the economy and prices worsens
"FISCAL CLIFF" RISK
The dollar was expected to stay firm this week as the U.S.
fiscal impasse is likely to continue to sap investor appetite
for risky assets and raise the dollar's safe-haven appeal.
Ten-year U.S. Treasury notes held steady in price to yield
roughly 1.776 percent in Asia, little changed from
late U.S. trade on Monday. The U.S. bond market was closed on
Tuesday for Christmas.
"I think there is about a 50 percent chance of the cliff
being avoided at the year-end through an agreement of some kind,
even if it turns out to be just a short-term postponement," said
Tomoaki Shishido, a rate analyst for Nomura Securities in Tokyo.
A U.S. official said on Tuesday that President Barack Obama
may return to Washington from his Hawaiian holiday as early as
Wednesday evening to address the unfinished negotiations over
the "fiscal cliff" of some $600 billion in automatic spending
cuts and tax increases set to start on Jan. 1.
If the United States falls off the fiscal cliff, economists
warn that the world's largest economy could plunge into
recession and drag global economies down as well.
Data out of Asia on Wednesday underscored fragile global
Exports in Thailand, Southeast Asia's second-largest
economy, rose nearly 27 percent in November from a year ago, but
that reflected recovery from flooding in late 2011 and not
growth in global demand.
South Korea's key consumer sentiment index held steady in
December from November and stood below the neutral point for a
fifth consecutive month, diminishing hopes of a quick economic
Gold edged lower on Wednesday on uncertainty over the fiscal
cliff, but a weaker yen sparked a rally in bullion futures on the Tokyo Commodity Exchange (TOCOM).
Brent crude climbed above $109 per barrel on
Wednesday in thin trade, with investors hoping for a last-minute
deal to avoid a U.S. fiscal crisis. U.S. crude futures
also inched up 0.4 percent to $88.94.