Nikkei 225 Caps Seven-Month Rally on Abe Nomination

Japanese shares rose, with the Nikkei 225 (NKY) Stock Average capping the longest monthly winning streak since 2006, after Prime Minister Shinzo Abe nominated Asian Development Bank President Haruhiko Kuroda to lead the Bank of Japan. (8301)

Sumitomo Mitsui Financial Group Inc. (8316) paced gains among banks amid speculation the central bank will deliver more easing. Komatsu Ltd. (6301), Japan’s largest construction machinery maker, climbed 3.7 percent on a report operating profit will exceed expectations and as the nation’s industrial output gained a second month. Toyota Motor Corp. (7203), the world’s biggest carmaker, surged 3.5 percent after U.S. economic data beat estimates. Japan Exchange Group Inc. slumped 11 percent in Tokyo after being included on the Topix Index.

The Nikkei 225 gained 2.7 percent to close at 11,559.36 in Tokyo, with volume 17 percent below the 30-day average. The equity gauge rose 3.8 percent this month, capping a seven-month advance. The broader Topix rose 2.3 percent to 975.66.

“We are done with who will be the next BOJ governor and from here the focus will be on what Kuroda will actually do,” said Soichiro Monji, chief strategist at Tokyo-based Daiwa SB Investments Ltd., which manages the equivalent of about 6 trillion yen ($65 billion). “Currency and stock markets are holding out hopes for bold monetary easing.”

The Topix surged 35 percent from Nov. 14 on optimism Abe and the central bank will tackle deflation. The measure is trading at 1.1 times book value, compared with 2.1 for the Standard & Poor’s 500 Index and 1.5 for the Stoxx Europe 600 Index.

Abenomics

New leadership may tilt Japan’s central bank toward a more expansionary monetary policy as Abe calls for a 2 percent inflation target to be reached as soon as possible. Kuroda, 68, advocated the inflation target more than a decade ago, and said additional easing can be justified for 2013.

Kikuo Iwata, a professor at Tokyo’s Gakushuin University who advocates greater oversight of the central bank, and BOJ Executive Director Hiroshi Nakaso were nominated for the two deputy governor positions, the parliament said in a statement today. Sitting Governor Masaaki Shirakawa and his deputies will step down on March 19.

Sumitomo Mitsui Financial climbed 3.6 percent to 3,710 yen and Mitsubishi UFJ Financial Group Inc. (8306), Japan’s biggest lender, advanced 1.6 percent to 513 yen. Sumitomo Realty & Development Co. gained 6.5 percent to 3,135 yen, pacing gains among real estate stocks. Tokyo Tatemono Co., a developer, surged 8.4 percent to 517 yen, the biggest gainer on the Nikkei 225.

U.S. Economic Data

Futures on the S&P 500 Index added 0.1 percent today. The U.S. equity gauge gained 1.3 percent yesterday and the Dow Jones Industrial Average reached its highest since October 2007 amid signs the world’s biggest economy is improving.

Orders for durable goods excluding transportation gear climbed in January by the most in a year, a sign companies are expanding, while pending home sales increased more than forecast.

“A recovery in U.S. capital investment is positive for the market because that’s a driving force for growth,” said Masaru Hamasaki, chief strategist at Toyota Asset Management Co., which oversees the equivalent of about 1.79 trillion yen.

Companies that do business in the U.S. advanced, with Toyota adding 3.5 percent to 4,765 yen. Canon Inc. (7751), a camera maker that gets 27 percent of its revenue in the Americas, rose 4 percent to 3,365 yen.

Japan’s industrial production climbed 1 percent in January from December, the Trade Ministry said today. The median estimate of 27 economists was for a 1.5 percent gain. Foreign investors bought 190.4 billion yen in Japanese stocks last week, according to the Finance Ministry.

Komatsu Profit

Komatsu advanced 3.7 percent to 2,338 yen after the Nikkei newspaper reported the company’s operating profit may surpass 300 billion yen in the year starting April. Mitsubishi Heavy Industries Ltd. (7011), a maker of machinery, rose 2.4 percent to 514 yen.

Tokyo-listed shares of Japan Exchange Group, which doubled in value since it moved to the country’s biggest equity venue in January, plunged 11 percent to 7,060 yen after surging in the final seconds of trading yesterday.

The shares were included in the Topix as of today and added to the MSCI All-Country World Index tomorrow. The so-called “index events” generated 30 billion yen in demand for the stock, which typically sees 5 billion yen in daily turnover, according to SMBC quantitative strategist Keiichi Ito.

GS Yuasa Corp., the battery maker for Boeing Co.’s grounded 787s, jumped 7.5 percent to 402 yen after Boeing said it will keep using its lithium-ion battery.

The Nikkei Stock Average Volatility Index (VNKY) fell 4.8 percent to 27.80, indicating traders expect a swing of about 8 percent of the benchmark gauge over the next 30 days.

To contact the reporter on this story: Yoshiaki Nohara in Tokyo at ynohara1@bloomberg.net

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

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