TOKYO Japan's Nikkei share average surged to a fresh 5-1/2-year high on Monday as the weakening yen further bolstered exporters, while brokerage shares attracted buyers who see growing volume bringing in much more fee income.
The benchmark Nikkei .N225 rose 1.2 percent to 14,782.21, its highest closing level since late December 2007. During the session it climbed as high as 14,849.01.
The index has gained 42 percent this year, helped by Prime Minister Shinzo Abe's growth policies and the Bank of Japan's aggressive monetary easing.
The Japanese yen broke below the 102 mark to the dollar on Monday, its weakest level since October 2008, after Tokyo escaped direct criticism of its aggressive monetary easing program at the Group of Seven meeting over the weekend.
"There is increasing demand for Japanese exporters from foreign investors," said Kyoya Okazawa, head of global equities at BNP Paribas in Tokyo.
He added that the Nikkei will probably reach 15,000 as soon as this week, helped by gains in exporters such as automakers and electronics manufacturers.
The earnings season is in full swing, and the yen's fall enables Japanese exporters to earn more from foreign currency profits.
On Monday, blue-chip exporters soared, with Nissan Motor Co (7201.T) jumping 4.5 percent, while both Toyota Motor Corp (7203.T) and Sony Corp (6758.T) ended up 3.8 percent each.
Panasonic Corp (6752.T) advanced 7.6 percent after the company said its operating profit will likely jump 55.3 percent this fiscal year.
Hitachi Ltd (6501.T) surged 7.8 percent after the electronics conglomerate forecast an 18.5 percent jump in operating profit for this fiscal year, citing a weaker yen and cost cuts.
Market participants say some exporters are reporting overly conservative forecasts for the current year to March, and investors expect many companies to raise their earnings guidance this fiscal year.
Even though the yen last traded at 101.71 yen to the dollar, the likes of Panasonic, Toyota Motor and Sony Corp based their foreign exchange assumptions at 90 yen to 95 yen against the dollar.
Among 1,394 companies reporting their full-year earnings, they based their dollar-yen assumptions at an average 92 yen and forecast an average of 21 percent growth in their operating profits for this fiscal year to March, said Tomochika Kitaoka, strategist at Mizuho Securities.
"But if the dollar-yen assumption is raised to 100 yen, a gap between companies' estimates and analysts' figures will be filled...their operating profits are expected to rise about 28 percent on year," Kitaoka said.
The Topix .TOPX gained 1.8 percent to 1,232.20 in very active trade, with volume hitting the highest since April 5 as 5.30 billion shares changed hands. That compared with last month's daily average volume of 4.31 billion shares.
The securities sub-index .ISECU.T, which soared 7.6 percent, was the best sectoral performer on hopes of an increase in commission fees from the booming market. Nomura Holdings (8604.T) jumped 9.6 percent and Daiwa Securities (8601.T) surged 8.3 percent.
The banking sector .IBNKS.T added 4.4 percent and other financials .IFINS.T gained 4 percent.
"Even though some profit-taking was seen due to signs of overheating, the market ended up posting strong gains. I won't be surprised if the Nikkei reaches 15,000 this week," said Hiroaki Hiwada, a senior strategist at Toyo Securities.
(Additional reporting by Ayai Tomisawa; Editing by Eric Meijer)