October 25, 2012 / 2:26 AM / 5 years ago

Nikkei hits four-week closing high on hopes of BOJ easing

TOKYO (Reuters) - Japan’s Nikkei average rose to a four-week closing high on Thursday, lifted by exporters as the yen weakened on growing expectations that the Bank of Japan would further ease monetary policy next week.

An employee of Tokyo Stock Exchange monitors the market at the bourse in Tokyo September 26, 2012. REUTERS/Yuriko Nakao

A 5.5 percent jump in KDDI Corp (9433.T) on expectations that the mobile operator would see stronger growth in the next business year also boosted the index.

The Nikkei .N225 climbed 1.1 percent to 9,055.20, breaking above its 5-day moving average at 9,007.43 but faced resistance at the 200-day moving average at 9,056.05.

The benchmark had risen for seven straight sessions before easing on Wednesday, gaining 5.6 percent during its longest winning streak since July 2011. It is up 7.1 percent this year.

But early results from Japan’s corporate earnings season have been weak, with nine out of the 12 Nikkei companies that have reported undershooting market expectations.

“There are lots of companies whose downward revisions were much wider than expectations,” said Yasuo Sakuma, portfolio manager at Bayview Asset Management. “But it’s a tug-of-war between poor corporate earnings and the softer yen.”

The yen hit a four-month low against the dollar at 80.14 yen on Thursday on growing expectations that the Bank of Japan will further ease monetary policy when it meets next week.

A more attractive exchange rate helped support some exporters, with Nissan Motor Co (7201.T) up 1.9 percent, Nikon Corp (7731.T) adding 1.5 percent and construction machinery maker Komatsu Ltd (6301.T) gaining 1.8 percent.

“However, as more easing has already been priced into the currency and equity markets, it’s more likely that shares will drop after the BOJ’s decision,” said Yutaka Miura, senior technical analyst at Mizuho Securities.

“At the moment the soft yen is shielding Japanese shares from the recent weakness in U.S. equity markets, but that will change if the currency appreciates.”

Andrew Pease, chief investment strategist for Asia-Pacific at Russell Investments, said the BOJ would have to announce very aggressive steps to change foreign investors’ sentiment towards Japan, even though Japanese stocks were 25 percent undervalued on his own measure.

“(Japan) is a market global investors have given up on. A lot of them have been burnt so many times,” he said.

Canon Inc 7751. rose 2.2 percent ahead of its third-quarter results.

After the bell, the camera and printer maker cut its full-year operating profit outlook nearly 10 percent to 356 billion yen ($4.5 billion), hit by slow European demand and a suspension of production in China in September amid anti-Japan protests.

    The broader Topix .TOPX index gained 1.1 percent to 751.42 in relatively light trade, with 1.59 billion shares changing hands, down from Wednesday's 1.78 billion and last week's average of 1.77 billion.


    Sharp Corp (6753.T) shed 4.2 percent after the Nikkei newspaper said the struggling TV maker would likely post a first-half net loss of 400 billion yen, nearly double an earlier estimate, due to bigger-than-expected restructuring costs.

    Sharp shares have fallen 76 percent so far this year, while short-selling interest in the Japanese firm remained high, with 93.49 percent of its stock that is available to be borrowed out on loan as of October 23, according to data provider Markit.

    Nippon Electric Glass (5214.T) slumped 7.9 percent as investors were disappointed with its earnings guidance.

    Some companies gained despite lowering their forecasts, as the downgrades did not match the dire performance factored in by investors.

    Videogames makes Nintendo Co Ltd 7974.OS rose 3.2 percent after cutting its annual profit outlook to 20 billion yen from 35 billion yen forecast in July. Investors were also pinning their hopes on its new Wii console to spur growth, while a softer yen helped.

    Hitachi Metals Ltd (5486.T) surged 5.9 percent as investors covered bearish bets on the view that the cut in the company’s operating profit forecast was not quite as bad as expected. The company lowered its operating profit forecast to 42.5 billion yen from 50 billion yen. ($1 = 79.8250 Japanese yen)

    Additional reporting by Sophie Knight; Editing by Richard Pullin

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