The Nikkei share average booked its biggest one-day percentage gain in 13 months on Monday, rebounding from a plunge last week as the Federal Reserve's move to cut its discount rate eased fears about credit concerns and prompted buying across the board.
Blue chip exporters gained ground as the dollar was at around 114.70 yen by the market close, after diving as low as 111.60 yen on Friday, its lowest since June 2006. "The key is that the US Fed took action and sent a message across the market that it will take another if the market falls," said Takahiko Murai, general manager of equities Nozomi Securities. "The Fed has more ammunition for a subsequent rate cut. This is supporting the market."
The Nikkei rose 458.80 points or 3.0 percent to 15,732.48, logging its biggest percentage rise since July 2006. The benchmark recouped some of its 5.4 percent slide on Friday, which ended a week in which it lost 9 percent, its biggest weekly drop in seven years.
The TOPIX was up 2.92 percent, or 43.18 points, at 1,523.57, regaining some of the 9.4 percent it lost last week, which was its biggest one-week fall since September 1990. Following last week's dive, the market was ready to bounce back with the TOPIX read to break above 1,600, but the index may struggle to advance above that, said Masaki Iso, chief investment officer at Yasuda Asset Management Co Ltd.
"It all depends on how long it will take for the credit concerns to settle. There is a possibility that consumer confidence could deteriorate," he said. But there are also optimists such as Mark Cutis, chief investment officer at Shinsei Bank.
"I think the subprime fiasco is probably over," he told a news conference. "I still think equity markets can go higher. I'm one of the few that believes that Japanese equities are OK. Japan has no serious structural problems."
Trade was at normal levels with 2.2 billion shares changing hands on the Tokyo stock exchange's first section, compared with a daily average volume of 2.1 billion shares in July. Advancers outnumbered decliners by a ratio of nearly 4 to 1. Canon Inc leapt 7.6 percent to 5,810 yen, paring its 8.6 percent plunge on Friday, and Toyota Motor Corp surged 4.2 percent to 6,450 yen after a 7.2 percent dive from the previous session.
A notable stock was Daikin Industries Ltd, a maker of air conditioners, which soared 8.9 percent to 4,770 yen after it confirmed a Nikkei report that it would enter the US household market around summer 2008. Financial stocks rang up gains with Mizuho Financial Group Inc up 5.1 percent at 664,000 yen and Mitsubishi UFJ Financial Group rising 2.8 percent to 1.09 million yen. Energy stocks rose on higher oil prices. Nippon Oil Corp shot up 6.9 percent to 885 yen. Trading houses benefited from higher commodity prices with Mitsubishi Corp gaining 6.8 percent to 2,815 yen
In the steel sector, shares of Nippon Steel Corp jumped 4.3 percent to 745 yen and those of JFE Holdings Inc surged 4 percent to 7,060 yen after the Nikkei business daily reported on Sunday that Japan's two largest steelmakers separately plan to mass-produce multicrystal silicon for solar cells. After the market closed, Daiwa Securities Group Inc said it planned to buy back up to 30 billion yen of its own shares from August 21 to September 20.
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