* Nikkei rises 0.7 pct, Topix gains 1.1 pct
* Volume highest since March 2011
* Buying continues on easing hopes - analyst
* Stocks benefiting from Abe's policies gain
* JAL falls on report LDP rescinding tax breaks
By Ayai Tomisawa
TOKYO, Jan 10 Japan's Nikkei average rose on
Thursday in active trade as renewed weakness in the yen
bolstered shares of exporters, while China's strong exports data
lifted investor sentiment.
The Nikkei climbed 0.7 percent to 10,652.64, taking
the index deep into "overbought" territory. Its 14-day relative
strength index stood at 75.83, above the 70-mark which is deemed
overbought and often indicates the market is ripe for a
correction in the near term.
The Nikkei China 50 index, comprised of companies
with significant exposure to the world's second-largest economy,
gained 1.3 percent as China's exports expanded at their fastest
pace in seven months in December.
Shares of exporters, which have suffered from a strong yen
and competition from South Korean companies, have been boosted
by the yen's depreciation in the past two months.
With ongoing expectations that the central bank will ease
monetary policy, major funds and retail investors continued
adding Japanese stocks, analysts said.
"Some funds are already taking profits from the recent
gains, but there are other investors who have not caught up with
the speed so they are buying," said Hikaru Sato, a senior
technical analyst at Daiwa Securities, adding that the Nikkei is
gradually testing the 11,000-line.
The currency has been weakening since Shinzo Abe, the new
prime minister, called on the Bank of Japan to adopt a bolder
policy to revitalise the economy, including setting an inflation
target of 2 percent. During that period, the Nikkei has rallied
The broader Topix index gained 1.1 percent to 889.02
in active trade, with 4.17 billion shares changing hands, the
largest volume since March 2011.
A senior trader at a foreign bank said some people remained
sceptical of the rally, and many were buying derivatives instead
of taking big positions in stocks.
"It's sort of a slow burn but I actually prefer this. It's a
much nicer rally where you have this 50, 60 basis points move
higher than this crazy 3 percent, 4 percent day when we squeeze
higher," he said. "It's a much higher quality rally because it
gives people time to work and think of what they want to do."
The trader said many investors were looking at call options
with a strike price of 11,000, some 3.3 percent above the
Nikkei's current level.
Among exporters, Toyota Motor Corp, Honda Motor Co
, Daikin Industries and Nikon Corp
rose between 1.0 and 4.0 percent.
The yen was down 0.2 percent at 88.06 to the dollar
on Thursday after falling 1 percent in the previous session.
Isuzu Motors Ltd climbed 3.8 percent, outpacing
other automakers after General Motors Co said it and
Isuzu would discuss the possibility of jointly developing a
next-generation pickup truck.
FOREIGN NET BUY IN 8TH WEEK
A change in sentiment towards Japan after Abe's call has
perked up foreign investors' interest in Japanese equities.
Foreign investors bought a net 178.9 billion yen ($2 billion)
worth of shares in the week ended Jan. 5, the eighth consecutive
week of net purchases, Ministry of Finance data showed.
Stocks expected to be benefiting from Abe's policies, such
as education providers and housing sellers, were in demand.
The Nikkei newspaper has reported that the new prime
minister plans to make certain gift money for grandchildren's
education tax-exempt and to provide cash benefits to eligible
Tokyo Individualized Educational Institute jumped
6.4 percent, while homebuilder SxL Corp and Sanei
Architecture planning were both up 3.1 percent.
BNP Paribas, however, recommended that investors book
profits before the central bank's policy meeting on Jan. 21 and
22, saying gains were likely to be limited in the short term.
"We are expecting the short-term upside to be limited: those
with exposure can implement an overlay by staying long and
selling an out of the money call as a yield enhancement
strategy; those without exposure can buy a call spread when the
market consolidates; and we would not object to investors who
want to unwind part of the positions in order to lock in
profits," the bank said in a research note.
On the other hand, Japan Airlines Co fell 4.1
percent after a media report said the ruling LDP tax research
commission was considering rescinding tax breaks for the
carrier, which relisted last year after it filed for bankruptcy
protection in 2010.