TOKYO Japan's Nikkei share average edged up to a 7-month closing high on Monday, led by exporters on expectations that a weaker yen will boost earnings.
Exporters moved higher but trimmed early gains on profit-taking as investors worried about the pace of recent gains in the Japanese market. Toyota Motor Corp (7203.T), Honda Motor Co (7267.T) and Canon Inc (7751.T) have risen 13-16 percent so far this month. The three managed to hold gains of 0.2-1.7 percent on Monday and were among the five most-traded stocks by turnover.
The Nikkei .N225 rose 0.2 percent to 9,388.94, its highest closing level since April 27. It rose as high as 9,487.94 in early trade.
The yen has come under pressure on expectations the Bank of Japan will be pushed towards more drastic easing, after the country's opposition party, tipped to win next month's election, urged radical monetary stimulus to beat deflation.
The opposition Liberal Democratic Party (LDP) is holding its lead ahead of a December 16 election, opinion polls showed on Monday.
The dollar was trading at 82.26 yen on Monday, near an eight-month high around 82.84 set last week.
Traders said that investors, who were underweight of Japanese stocks, continued to pour new money in to the Japanese market on the back or the weakening yen. On Monday, foreign securities posted net buy orders for Japanese stocks for an eleventh day.
"It's true that foreigners are returning to the Japanese market and they are buyers of Japanese shares," said Makoto Kikuchi, the chief executive officer of Myojo Asset Management.
But he added that while the Nikkei has gained 8.4 percent in two weeks, there are signs that the Japanese market is overbought and profit-taking is no surprise.
"The 9,500-mark is a big psychological resistance line, and we still don't know if foreign investors are making long-term investments as it's still fresh in their minds that many exporters' latest results were bad."
Japanese company earnings have been weak this quarterly reporting season, with 56 percent of Nikkei companies undershooting market expectations, according to Thomson Reuters StarMine data. That compared with 54 percent in the previous quarter.
BOTH VOLUME AND VALUE CATCH UP
While investors remain cautious about the rising pace in the Japanese market, sentiment remains positive, which is reflected in the Tokyo market's trading volume and value.
Last week's average daily trading volume was high, with 1.94 billion shares changing hands in the Tokyo Stock Exchange's first section, up 9 percent from the previous week. Daily trading value was also positive, with 1.15 trillion yen of shares traded, up about 13 percent on the previous week.
On Monday, 2.1 billion shares changed hands on the board while trading value was 1.3 trillion yen.
"This is a good sign that energy still lasts even though daily gains are limited," said Hiroichi Nishi, general manager at SMBC Nikko Securities.
Among other shares, the upbeat sentiment pushed brokerage shares Nomura Holdings Inc (8604.T) up 1.5 percent to a seven-month high and rival Daiwa Securities Group Inc (8601.T) 1.9 percent higher.
Shares of embattled Renesas Electronics Corp (6723.T) jumped 17 percent after the Nikkei reported that its shareholders have approved a government-led bailout.
Sony Corp (6758.T) and Panasonic Corp (6752.T) underperformed, falling 1.9 percent and 0.3 percent, respectively after credit rating agency Fitch downgraded their debt ratings to "junk" status on Friday.
The Nikkei has added 11 percent so far this year, putting its performance on a par with the U.S. S&P 500's .INX 12.05 percent rise and the pan-European STOXX Europe 600's 11.77 percent gain.
The broader Topix .TOPX added 0.4 percent to 779.50.
(Editing by Eric Meijer and Richard Pullin)