Nikkei 225 Heads for Biggest Three-Day Rally Since 2009

Japanese stocks surged, with the Nikkei 225 Stock Average capping the biggest three-day rally in two years, after Haruhiko Kuroda announced unprecedented stimulus in his first policy meeting as Bank of Japan governor.

Real-estate shares climbed the most among the 33 Topix Index industry groups, with Mitsui Fudosan Co. soaring 13 percent as investors bought shares expected to benefit from asset appreciation. Sumitomo Mitsui Financial Group Inc. gained 4.8 percent to pace gains among the country’s biggest lenders. Mazda Motor Corp., Japan’s most export-dependent automaker, advanced 3.1 percent as the yen touched a three-year low.

The Nikkei 225 gained 1.6 percent to close at 12,833.64 in Tokyo on volume that was more than double the 30-day average . The benchmark advance 6.9 percent in the past three days, the most since March 2011. The Topix added 2.7 percent to 1,066.24 today. The yen dropped as much as 0.9 percent to 97.19 per dollar. The yield on Japan’s 10-year government notes rebounded 22 basis points from a record low of 0.315 percent.

“The Japanese stock market is on the verge of a bubble,” said Ryota Sakagami, chief strategist at SMBC Nikko Securities in Tokyo. “The Bank of Japan and the government are working together to push up asset prices. The BOJ has given the impression that it will act if the market were to go down, so it doesn’t look like there will be a correction.”

The Nikkei 225 has rallied 48 percent since mid-November, the biggest jump among major equity gauges, amid bets policy makers would make good on Kuroda’s pledge to do “whatever it takes” to beat deflation. The advance has increased the value of shares on the index to 1.6 times book value from 1.1 on Nov. 14, when elections were announced that brought Prime Minister Shinzo Abe to power. The Nikkei added 3.5 percent this week.

New Regime

The central bank yesterday said it will double the monetary base by the end of 2014 by buying government bonds, its boldest round of quantitative easing. JPMorgan Chase & Co. said the Japanese and U.S. central banks are now “in the same camp” when it comes to monetary stimulus.

“The change in Japan’s monetary policy is clear,” said Soichiro Monji, chief strategist at Tokyo-based Daiwa SB Investments Ltd., which manages about 6 trillion yen ($62 billion). Monji expects the Nikkei 225 will rise to about 16,000 this year, a gain of more than 20 percent. “They didn’t hesitate to use all of the cards.”

Developers, Banks

Real-estate and banking shares gained.

Mitsui Fudosan, Japan’s largest property company by revenue, surged 13 percent to 3,310 yen. Mitsubishi Estate Co. added 11 percent to 3,145 yen. Tokyo Tatemono Co. climbed 21 percent to 857 yen after the developer’s rating was raised to outperform at Credit Suisse Group AG.

Mitsubishi UFJ Financial Group Inc., Japan’s biggest lender, advanced 5 percent to 607 yen. Sumitomo Mitsui Financial, the No. 2, increased 4.8 percent to 4,150 yen.

“Expectations for inflation under the BOJ’s new policy would have a positive effect on bank lending,” said Shinichiro Nakamura, a Tokyo-based analyst at SMBC Nikko Securities Inc.

Exporters climbed as the yen fell. Mazda rose 3.1 percent to 298 yen. Toyota Motor Corp. gained 3.4 percent to 5,090 yen. Komatsu Ltd., Japan’s largest construction machinery maker, jumped 5.5 percent to 2,201 yen. Canon Inc. gained 1.5 percent to 3,290 yen.

Futures on the Standard & Poor’s 500 Index fell 0.2 percent after the gauge added 0.4 percent yesterday. A U.S. Labor Department report today is forecast to show payrolls gained by 190,000 last month, following a 236,000 advance in February, according to economists surveyed by Bloomberg. The jobless rate probably remained at 7.7 percent.

Seven & I

Seven & I Holdings Co. surged 10 percent to 3,400 yen, the highest since August 2008, after the owner of the 7-Eleven convenience-store brand said a weaker yen and new stores will help boost profit to a record this year.

Dai-Ichi Life Insurance Co. paced declines among some of Japan’s biggest insurers as government bond yields dropped to record lows. Dai-Ichi Life dropped 6.4 percent to 110,500 yen. T&D Holdings Inc. slid 8.7 percent to 938 yen.

The new BOJ policy means “life insurers cannot even purchase enough JGBs to meet asset liability matching demand,” Greg Gibbs, a Singapore-based senior currency strategist at Royal Bank of Scotland Group Plc, wrote in an e-mail.

The Nikkei Stock Average Volatility Index rose 9.3 percent to 28.56 today, indicating traders expect a swing of about 8.2 percent on the benchmark gauge over the next 30 days.