Nikkei surges on reports GPIF to raise stock holdings; BOJ also in focus

TOKYO: Japan's Nikkei share average jumped on Friday as the government prepared to approve new allocation targets for the world's largest pension fund that are expected to sharply increase its purchases of domestic stocks.

Tokyo will approve on Friday targets for the $1.2 trillion Government Pension Investment Fund (GPIF) which aim to increase the ratio of Japanese shares in its holdings to 25 percent form the current 12 percent, sources told Reuters. [ID: nT9N0O202L]

The Nikkei benchmark soared 1.8 percent to 15,931.95 by 0141 GMT, its highest level since Oct 7.

Global financial markets closely watch GPIF's allocations, as a shift of as little as 1 percentage-point shift means a transfer of more than $10 billion.

"It's a surprise. The consensus was that GPIF would go to 20 percent Japanese stocks. The impact of 25 percent will be strong, with a positive impact for stocks," said Masayuki Doshida, senior market analyst at Rakuten Securities in Tokyo.

The GPIF move was a boon to investors awaiting the outcome of the Bank of Japan's policy meeting.

The central bank is expected to maintain its unprecedented asset buying program and stick to its upbeat 2 percent inflation forecast, suggesting no new easing on the horizon.

However, data released on Friday morning showed that Japan's consumer inflation slowed for a second consecutive month in September, underscoring the BOJ's uphill task in reflating the Japanese economy.

The central bank's policy decision is due around 0230-0330 GMT.

Canon Inc soared 3.0 percent after the electronics giant announced that it will buy back up to 1.5 percent, or 50 billion yen ($458 million), of its own shares.

Daiwa Securities Inc also jumped 3.4 percent after beating its second-quarter net profit forecast.

In currencies, strengthening Federal Reserve confidence in the US economy pushed the dollar up against the yen, helping Japanese exporters.

At 0144 GMT the dollar bought 109.33, up about 0.1 percent on the day and not far from Thursday's four-week high of 109.47.

Toyota Corp gained 1.6 percent, Nissan Motor Co Ltd climbed 2.6 percent and Panasonic Corp jumped 1.8 percent.

The broader Topix was up 1.5 percent to 1,296.91, while the JPX-Nikkei Index 400 also added 1.5 percent to 11,813.23.