* Nikkei rises 1.0 pct, Topix up 1.1 pct in active trade
* Volume highest since March
* New money coming in - trader
* Exporters benefit from LDP victory
* Investors take profit on utilities after Monday's rally
By Ayai Tomisawa
TOKYO, Dec 18 Japan's Nikkei average neared the
10,000-mark, hitting an 8-1/2-month high for a second day on
Tuesday, lifted by expectations of aggressive monetary easing
after the conservative Liberal Democratic Party swept back to
Hopes that Washington will be able to resolve the 'fiscal
cliff' -- a combination of spending cuts and tax increases
taking effect in the new year -- also added to the positive mood
in the market.
The Nikkei rose 1.0 percent to 9,923.01 after
advancing to as high as 9,967.24, with exporters leading the
gains as the yen fell further.
The gains took the index deeper into "overbought" territory,
with its 14-day relative strength index at 80.64, well above 70
which is deemed overbought and often indicates a possible
About 3.42 billion shares changed hands on the main board,
the highest level since March 9. That compares with last week's
average daily volume of 2.29 billion shares.
Traders said that a falling yen has attracted more buyers
into the equity market on expectations that exporters will be
reporting better earnings for the coming year.
"The gains are not just from short-covering. New money is
coming in, so although some correction may be seen, investors
will probably keep buying as they don't want to miss out the
opportunity to buy," said Hideyuki Okoshi, general manager at
The benchmark Nikkei also broke above the upper band of the
momentum indicator Bollinger Bands, signalling that a correction
could be ripe.
"At this stage, we've seen some profit-taking in utilities
after a huge move they made yesterday. The yen-sensitive,
LDP-trade is still in full effect, with volume remaining very
good considering the quiet period of the year," a senior dealer
at a foreign brokerage said.
"We wouldn't be surprised to see profit-taking a little bit
more than we are currently seeing."
The Nikkei has risen 14.6 percent over the past five weeks,
driven by yen weakness after Shinzo Abe, who was elected as the
new prime minister on Sunday, called for the central bank to
embark on "unlimited easing" and set an inflation target of 2
percent. The index is up 17.4 percent this year.
The dollar edged up 0.2 percent to 84.07 yen, nearing
a high of about 84.50 yen that had been hit on Monday, the
greenback's strongest level against the yen since April 2011.
Exporters were in demand on Tuesday, with Toyota Motor Corp
, Honda Motor Co, Canon Inc and
Hitachi Ltd up between 1.8 and 3.3 percent.
Real estate firms, which stand to benefit from Abe's call
for a reflationary policy, extended gains, with Mitsubishi
Estate Co rising 1.2 percent and Mitsui Fudosan Co
gaining 1.8 percent.
BNP Paribas said it expected the Nikkei to reach 11,000 in
the first half of next year, 10.9 percent above Tuesday's
Its top picks under a weak yen scenario included Toyota,
construction machinery maker Komatsu Ltd, steelmaker
JFE Holdings, Canon, lender Sumitomo Mitsui Financial
Group and game company Nintendo Co Ltd.
REAL TEST IN H2 2013
But BNP Paribas said the real test for the new government
would be in the second half of 2013.
"Compiling the budget and replacing BOJ executives is one
thing, but the question remains whether only economic stimulus
measures and monetary easing will pull the Japanese economy out
of deflation," it wrote in a note.
"Concerns about deteriorating government finances may
finally bring an upswing in long-term rates in the bond market
and Japan could face the triple whammy of a falling currency,
falling government bond prices, and falling share prices."
Tetsuro Ii, the chief executive of Commons Asset Management,
said that he hopes the LDP-led government can introduce more
measures to help businesses grow in the long-term such as
reducing corporate tax.
"I believe that the LDP's victory means a lot to the market.
But we are only interested in investing long-term in companies
which have competitiveness, regardless of the state of the
economy, so we are not immediately buying stocks like cement
makers or Sharp Corp," Ii said.
The broader Topix index gained 1.1 percent
Power utilities fell after rallying on Monday following the
LDP victory as the party is opposed to nuclear-free policy.
Kansai Electric Power Co shed 4.5 percent and Chubu
Electric Power Co dropped 3.5 percent, but Tokyo
Electric Power Co, which were battered by a meltdown in
its Fukushima nuclear power plant after last year's earthquake,
surged 17.3 percent.
Shionogi & Co Ltd advanced 4.4 percent after the
drugmaker said its joint venture with GlaxoSmithKline
and Pfizer has applied to health regulators in the
United States, Canada and Europe for approval of its HIV drug