Tokyo stocks rebound sharply on weaker yen, monetary easing hopes

19:59, March 05, 2010      

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Japan's Nikkei Stock Average rose 2 percent on Friday as a weaker yen buoyed exporters and better-than- expected U.S. retail sales data coupled with indications Japan's central bank may take monetary easing steps lifted investor optimism.

Japan's key benchmark Nikkei gained 223.24 points from Thursday to close the week at 10,368.96.

The broader Topix index of all First Section issues on the Tokyo Stock Exchange advanced 13.17 points, or 1.47 percent, to 910.81.

The yen weakened for a second day against the U.S. dollar and fell against the euro on speculation the Bank of Japan (BOJ) may discuss monetary easing measures to tackle deflation, which lifted market sentiment, brokers said.

The Nikkei business daily reported the central bank is likely to discuss more monetary easing measures at its next meeting starting March 16, possibly including ways to lower short-term rates, adding that a decision on specific measures is likely to take place in April, when two board meetings are scheduled.

"An additional response from the BOJ is effective in guiding yen-based term rates lower, thereby eliminating upward pressure on the yen," said Yasuhiro Onakado, chief economist at Tokyo at Daiwa SB Investments Ltd. "Having said this, chances of such moves look to be slim."

Some analysts indicated that recent pressure on Japan's central bank by the government may, if credit easing measures are enacted, have a monumental impact on the currency and stave off the yen- carry trade seen last year. Japan's central bank unveiled a 10 trillion yen (112.1 billion U. S. dollars) lending facility for commercial banks in December after the yen surged to a 14-year high of 84.83 per dollar in November and government ministers have since urged the central bank to do more to combat deflation.

"The BOJ's measures would have a big impact on the currency market," said Yoji Takeda, a fund manager at RBC Investment Ltd. " With the yen hovering around 88 per dollar, the government and the central bank may be getting jittery and feeling the urge to take action."

Brokers indicated that such a move by the BOJ would entice more investors to buy Japanese issues as a weaker yen would revitalize exporters and relevant equities in this sector.

The yen weakened to as much as 89.35 per dollar during trading hours on Friday, reversing the direction of export-related shares which took a pummeling on Thursday.

Exporters cheer a weaker yen as profits made abroad are boosted when repatriated.

As such Canon Inc. surged 3.32 percent to 3,890 yen and Olympus Corp. added 1.29 percent to 2,739 yen.

Kyocera Corp. gained 2.64 percent to 8,150 yen, whilst Panasonic Corp. advanced 2.09 percent to 1,271 yen.

Sony Corp. jumped 3.39 percent to 3,205 yen and Sharp Corp. closed the week in positive territory adding 1.88 percent from Thursday to 1,027 yen.

Chinese Premier Wen Jiabao's remarks at the National People's Congress on Friday saying that China would continue to implement a "proactive" fiscal policy and a "moderately easy" monetary policy, and that China was targeting 8 percent growth in gross domestic product this year, lifted domestic issues which rely on China as a major source of revenue, brokers added.

Construction and mining firm Komatsu Ltd. gained 2.05 percent to 1,842 yen on the news and Kubota Corp., who make industrial farming machinery, climbed 2.75 percent to 785 yen.

Fuji Heavy Industries Ltd. added 1.68 percent to 422 yen.

Retail issues gained collectively with Daiwa House Industry Co. Ltd. advancing 2.58 percent to 993 and Heiwa Real Estate Co. Ltd. rising 3.65 percent to 284 yen.

Mitsui Fudosan Co. Ltd. rose 2.68 percent while commercial property developer Sekisui House Ltd. surged 4.04 percent to 902 yen.

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