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Nikkei 225 Extends Eight-Month High on Stimulus Optimism

Japanese shares rose, with the Nikkei 225 (NKY) Stock Average extending an eight-month high, amid optimism the central bank will ease policy after the election, and on signs U.S. budget talks are progressing.

Tokyo Electric Power Co. (9501) soared 17 percent, capping its biggest two-day gain in 18 months, on prospects the Liberal Democratic Party’s return to power will pave the way for the restart of nuclear reactors. Sharp Corp. rose to a five-month high as concern about its debts eased. Canon Inc. (7751), the world’s biggest camera maker, rose 3.3 percent as the yen traded near a 20-month low. Softbank Corp. (9984) gained 4.8 percent after securing a loan to acquire Sprint Nextel Corp.

The Nikkei 225 gained 1 percent to 9,923.01 at the close of trading in Tokyo, its highest since April 3. Shares rose as President Barack Obama and House Speaker John Boehner appeared to make progress during budget talks, according to a person familiar with the matter. The broader Topix Index (TPX) advanced 1.1 percent to 816.85 today before the Bank of Japan starts a meeting tomorrow with incoming Prime Minister Shinzo Abe pressing for more monetary easing.

“There’s a chance that they’ll come to a conclusion about the U.S. fiscal cliff before Christmas,” said Fumiyuki Nakanishi, a strategist at Tokyo-based SMBC Friend Securities Co. “Because of policy talks between the LDP and the Bank of Japan as well as news of the inclusion of a large extra budget, the market expectations for the new government are likely to last more than a day.”

Nikkei Surge

The Nikkei 225 has surged 17 percent this year, poised to reverse two years of losses, as the Bank of Japan joined central banks around the world to spur economic growth and on signs of recovery in the U.S. and China.

The Topix, which has gained 12 percent this year, trades at 0.967 times book value, compared with 2.2 for the Standard & Poor’s 500 Index and 1.6 for the Europe Stoxx 600 Index. A number less than one means that companies can be bought for less than the value of their assets.

Futures on the S&P 500 advanced 0.2 percent today. The gauge surged 1.2 percent to a two-month high yesterday. Obama offered a budget compromise that would increase tax rates for households earning more than $400,000 a year, up from his earlier proposal to raise taxes on those earning more than $250,000, said a person familiar with the talks.

Budget Offer

In exchange, Obama asked for authority to increase the U.S. debt limit for two years without congressional approval. The president is negotiating with Republican lawmakers to avert the so-called fiscal cliff, more than $600 billion in tax increases and spending cuts set to start in January.

Tokyo Electric soared 17 percent to 237 yen. The stock, which lost more than 90 percent of its value after the meltdown at its Fukushima plant in March 2011, has jumped 55 percent in two days. There are expectations the pro-nuclear energy LDP will press for reactor restarts even in the face of public safety concerns spurred by the nuclear disaster.

Sharp Jumps

Sharp surged 8.6 percent to 327 yen, the highest since July 13, after rising as much as 24 percent. The TV maker that warned in November about its survival reached an agreement this month to sell as much as 9.9 billion yen ($118 million) of shares to San Diego-based Qualcomm Inc. after failing to secure investment from Foxconn Technology Group.

Exporters advanced as the yen traded near its lowest against the dollar since April 2011 on optimism the new government will press for aggressive easing and a doubling of the nation’s inflation goal. A weaker yen boosts overseas earnings at Japanese companies.

Canon climbed 3.3 percent to 3,245 yen. Honda Motor Co. rose 1.8 percent to 2,892 yen.

Softbank Financing

Softbank rose 4.8 percent to 3,130 yen. The mobile carrier said its board approved a loan of as much as 1.65 trillion yen ($19.7 billion) to finance the purchase of 70 percent of Sprint Nextel for about $20.1 billion.

Smaller companies also gained today, with the Jasdaq Top-20 Index (JASDAQ20) rising for tenth consecutive day, its longest winning streak on record. Jasdaq Securities Exchange Inc. is Japan’s biggest market for start-up companies, and the Top-20 tracks the best performers on the exchange.

Osaka Securities Exchange Co. slid 1.6 percent to 407,000 yen after providing forecasts for Japan Exchange Group, the entity that will emerge after OSE merges with Tokyo Stock Exchange Group Inc. The new bourse, which is due to be listed in January, is expected to record 7 billion yen in net profit for the year ending in March.

The Nikkei Stock Average Volatility Index (VNKY) slid 2.4 percent to 17.19 today, indicating traders expect a swing of about 4.9 percent on the benchmark gauge over the next 30 days, according to data compiled by Bloomberg.

To contact the reporters on this story: Adam Haigh in Sydney at ahaigh1@bloomberg.net; Toshiro Hasegawa in Tokyo at thasegawa6@bloomberg.net

To contact the editor responsible for this story: Nick Gentle at ngentle2@bloomberg.net

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