* Exporters, interest rate-sensitive shares soar
* Toyota most traded stock by turnover, hits 4-year high
* Mitsubishi Heavy highest since 2008 on profit forecast
By Sophie Knight
TOKYO, Feb 6 Japan's Nikkei average surged 3.8
percent to close at its highest since October 2008, after the
yen fell sharply on bets the early exit of the central bank
governor opens the way for one who pursues aggressive monetary
The benchmark packed on 416.83 points to 11,463.75,
producing its biggest one-day gain since March 2011, as the
Japanese currency hit a fresh low of 94.08 against the dollar.
Wednesday's Bank of Japan Governor Masaaki Shirakawa said he
would step down, together with his two deputies, three weeks
before the end of his five-year term in April.
Prime Minister Shinzo Abe has put the central bank under
relentless pressure to do more to pull the economy out of the
doldrums. He has made it clear that he wants a governor who will
be bolder in loosening monetary policy.
"There was a very aggressive, solid weakening of the yen in
response to what seems like relatively trivial news. But it's
nonetheless news that signals the expectation and recognition
that the momentum in Japan is continuing to favour yen weakening
and risk-on mood," said Stefan Worrall, director of equity sales
at Credit Suisse in Tokyo.
While investors have been gunning for exporters over the
past 2-1/2 months as the yen has slid 15.5 percent against the
dollar, Worrall said there were other benefits to a more
competitive exchange rate.
"On a U.S. dollar basis Japan has yet to break out,
particularly if you compare its rally with rallies in Germany,
Australia, etc. A weakening yen should certainly see more than
the dollar-yen translation into profits," he said.
On Wednesday, brighter profit forecasts from the likes of
Toyota Motor Corp and Mitsubishi Heavy Machinery Ltd
helped sustain the bullish mood. The hikes stemmed from
the weaker yen, which inflates the value of earnings garnered
Toyota Motor Corp climbed 6.1 percent and was the
most-traded stock by turnover on the main board, while
Mitsubishi Heavy Industries soared 10.4 percent, with
both stocks hitting their highest levels since autumn 2008.
Expectations of a new BOJ governor were also a boon for
inflation-sensitive shares, as the central bank signed a new 2
percent inflation target last month with the government. On
Wednesday, the real estate sector advanced 4 percent.
Norihiro Fujito, senior investment strategist at Mitsubishi
UFJ Morgan Stanley, said the BOJ may start "open-ended" asset
buying in April, well before the 2014 start the central bank
committed to at its last policy meeting.
Fujito said he sees Kazumasa Iwata, a former BOJ deputy
governor and a vocal supporter of a 50 trillion yen asset
purchase fund, as the most likely candidate to succeed
Others seen as possible candidates are Haruhiko Kuroda,
president of the Asian Development Bank, and Heizo Takenaka, who
a decade ago was an economics minister under Prime Minister
If Takenaka is picked, "it could lift the market further
because he is foreign investors' favourite," said Yasuo Sakuma,
portfolio manager at Bayview Asset Management in Tokyo. "He is
the one who helped the country's economy recover through
aggressive restructuring under the Koizumi-led government, and
foreign investors like that."
Foreign brokerages continued to make bullish reports on
Japan. Societe Generale saying the country would emerge the
winner if an Asian "currency war" were to erupt.
"The rest of Asia is more similar to Japan in the 1990s.
Back then the currency was driven by capital flows; now the
stock market is driven by export prospects," Societe Generale
said. It noted that Japan was the only Asian nation in which a
weaker currency led to higher stock market returns in the run-up
to the 2008 crisis and in 2010-2012.
"If there is a currency war in Asia, with countries across
the region trying to engineer their currencies lower, this could
undermine stock markets - and backfire in terms of growth.
Another good reason to prefer the Nikkei," the report said.
According to Thomson Reuters data, the most traded February
Nikkei index options was a call at 11,750, 2.5
percent above where the index closed on Wednesday. The next
most traded was another call with a strike price of 11,500
, followed by a put at 11,000 and
another put at 11,250.