Japan’s Nikkei 225 Hits 32-Month High on Policy Outlook

 Japanese shares rose, with the Nikkei 225 Stock Average closing at a 32-month high, after Bank of Japan Governor Masaaki Shirakawa said the central bank will pursue powerful monetary easing.

Sony Corp., the nation’s biggest exporter of consumer electronics, rose 1.2 percent. Olympus Corp. led gains on the Nikkei 225 after the optics maker’s shares were recommended by Goldman Sachs Group Inc. Sharp Corp. slid 2.7 percent on a Nikkei newspaper report it cut production of displays for Apple Inc.’s iPhone on weaker-than expected demand for the handset.

The Nikkei 225 gained 0.7 percent to close at 10,879.08 in Tokyo, the highest since April 30, 2010. The broader Topix Index advanced 0.8 percent to 906.22 with about two stocks advancing for each that fell. Japan’s markets opened after a three-day weekend during which Prime Minister Shinzo Abe called for a “bold policy leader” to replace the BOJ’s Shirakawa.

“Abe’s remarks have affected the market, which likes the fact the government is pushing for monetary and fiscal measures simultaneously,” said Shintaro Takeuchi, portfolio investment group manager at Tokio Marine & Nichido Fire Insurance Co. that manages 8.67 trillion yen ($97 billion) in assets. “It’s up to fundamentals whether the market will extend gains from here.”

The Topix capped its longest weekly winning streak since 1989 on Jan. 11, when the Cabinet approved a 10.3 trillion yen stimulus package. Goldman, Bank of America Corp. and Nomura Holdings Inc. are expecting Japanese stocks to extend gains as added economic stimulus boosts earnings. The gauge is trading at 1.08 times book value, compared with 2.20 for the Standard & Poor’s 500 Index and 1.59 for the Stoxx Europe 600 Index.

Shirakawa Comments

Shirakawa, whose term ends in April, said the BOJ will provide powerful monetary easing and monitor the impact of currencies on prices and the Japanese economy. He spoke at a meeting of BOJ branch managers in Tokyo today.

At its meeting on Jan. 21-22, the BOJ will double its inflation target to 2 percent, a move advocated by Abe, according to people familiar with officials’ discussions. The yen reached 89.67 against the dollar yesterday, the weakest since June 2010, and 110 to the euro. A lower yen enhances the value of overseas earnings at Japanese exporters.

Shares pared gains as the yen strengthened after Economy Minister Akira Amari said Japan faces risks from any excessive decline in the currency, highlighting limits on Abe’s campaign to drive down the currency. The yen rose against all of its 16 major counterparts, dimming the outlook for Japanese exporters.

“The market has yet to have a sense about where the yen is likely to settle, and so market participants are looking for whatever clues available,” said Koichi Kurose, chief economist in Tokyo at Resona Bank Ltd., which oversees about 15 trillion yen.

Exporters Advance

Sony gained 1.2 percent to 995 yen, paring a gain of as much as 2.5 percent. Nissan Motor Co., a carmaker that gets 79 percent of its revenue outside Japan, added 1.2 percent to 883 yen after advancing as much as 2.2 percent.

Futures on the S&P 500 Index slid 0.2 percent today. The gauge yesterday fell 0.1 percent as Apple’s slump to an 11-month low amid concern about iPhone sales offset a rally in Dell Inc. shares.

Olympus advanced 7.7 percent to 1,937 yen after Goldman raised its rating to buy from neutral amid rising interchangeable lens camera sales.

Sharp paced declines by Apple suppliers after the Nikkei newswire said orders for iPhone 5 parts had been cut about 50 percent following lower-than-expected sales. Sharp, which makes displays for the smartphone, dropped 2.7 percent to 321 yen.

The Nikkei Stock Average Volatility Index added 4.7 percent to 21.97, indicating traders expect a swing of about 6.3 percent on the benchmark gauge over the next 30 days.

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