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Nikkei 225 Rises to Pre-Earthquake Level on Yen Weakness

Japanese shares rose, with the Nikkei 225 Stock Average (NKY) at its highest level since the day before the 2011 record earthquake, as the yen weakened amid calls from the new government for more monetary easing.

Mazda Motor Corp., which exports about 80 percent of its Japan-made vehicles, rose 7.1 percent to lead gains among auto exporters. Nippon Sheet Glass Co., which gets about 70 percent of its sales outside Japan, jumped 16 percent. Nomura Holdings Inc., Japan’s biggest brokerage, advanced 4.3 percent. Sharp Corp. declined 4.8 percent after a Nikkan Kogyo report that it hasn’t reached an agreement to sell a plant in China.

The Nikkei 225 climbed 0.9 percent to 10,322.98 at the close of trading in Tokyo, its highest close since March 10, 2011, the day before the earthquake and tsunami devastated northeastern Japan and triggered meltdowns at a nuclear power plant. The Topix Index (TPX) rose 0.8 percent to 854.09 after Prime Minister Shinzo Abe yesterday named his cabinet ministers.

“With the new cabinet, there is even more optimism for measures to counter deflation,” said Mitsushige Akino, Tokyo- based chief fund officer at Ichiyoshi Asset Management Co., which oversees about $356 million. “Stocks are reacting to a rapidly weakening yen, as well as expectation for more monetary easing from the Bank of Japan next month.”

The Topix is headed for an 17 percent increase this year, its biggest annual gain since 2005, when the index surged 44 percent. The gauge trades at book value, meaning that companies can be bought for roughly the value of their assets. The Standard & Poor’s 500 Index trades for 2.1 times book value.

Exporters Benefit

Indexes tracking makers of electronics and cars gave the Topix its biggest boost as a weaker yen increased the earnings outlook for exporters.

Panasonic Corp., the maker of Viera televisions, increased 1.4 percent to 517 yen. Mazda advanced 7.1 percent to 166 yen. The shares also rose after Nomura said the company was its top auto-industry pick.

Toyota Motor Corp., which exports about 47 percent of the cars made in Japan, climbed 2.6 percent to 3,930 yen. Japan’s biggest automaker advanced even after saying it will take a $1.1 billion writedown to settle claims that its vehicles lost value because of recalls for unintended acceleration-related issues.

Nippon Sheet Glass (5202), which receives about 41 percent of its revenue from Europe and 13 percent from North America, gained 16 percent to 110 yen, the biggest advance on the Nikkei 225.

Weaker Yen

The yen weakened to 85.82, its lowest level since September 2010 on speculation Abe will push the central bank to boost asset purchases and raise its inflation target. A weaker yen increases the value of overseas earnings when repatriated.

Financial shares rose amid optimism that the new government’s efforts to increase monetary easing and put a stop to deflation will boost the value of their assets and increase borrowing demand and investments.

Nomura advanced 4.3 percent to 491 yen, rising for an 11th consecutive day. Mitsubishi UFJ Financial Group Inc., Japan’s biggest lender, added 0.5 percent to 451 yen, pacing an advance among banking shares. Mitsubishi Estate Co. (8802), the country’s biggest developer by market value, rose 3.3 percent to 2,037 yen.

Abe said yesterday that “bold” monetary policy is one of the three pillars of his economic measures. Taro Aso, named finance minister yesterday, said that beating the strong yen and deflation are his top priorities. Abe asked Aso to increase coordination with the Bank of Japan and has called for comprehensive measures to counter the yen’s strength, Aso told reporters today.

Stimulus Hopes

“Abe is keen on changing the Bank of Japan’s inflation target and getting the Bank of Japan to undertake aggressive quantitative easing,” said Stephen Halmarick, Sydney-based head of investment markets research at Colonial First State Global Asset Management, which oversees about $150 billion. “The market is expecting pretty significant stimulus out of the BOJ in the new year.”

Among stocks that declined, Sharp fell 4.8 percent to 300 yen. The company hasn’t reached an agreement on the terms of its proposed sale of its plant in Nanjing, China, to Taiwan’s Hon Hai Precision Industry Co., the Nikkan Kogyo newspaper reported, citing people familiar with the situation.

The Nikkei Stock Average Volatility Index rose 7.3 percent to 23.16, indicating traders expect a swing of about 6.6 percent on the benchmark gauge over the next 30 days. Trading volume on the Nikkei 225 was about 50 percent above the 30-day average for the time of day.

Japan’s markets are shut for four days next week for the New Year holidays.

To contact the reporters on this story: Anna Kitanaka in Tokyo at akitanaka@bloomberg.net; Satoshi Kawano in Tokyo at skawano1@bloomberg.net

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

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