The Nikkei average rose 0.82 percent to its highest close in more than seven months on Thursday as exporters including Sony Corp climbed on a weaker yen and upbeat US retail sales data. Shares sensitive to domestic demand such as Softbank Corp also gained on the view that the Bank of Japan will not raise interest rates next week.
Sony rose 1.8 percent to 4,970 yen and Canon Inc gained 1.7 percent to 6,650 yen, as investors bought shares of exporters after the dollar rose to a three-week high of 117.65 yen on Wednesday. Wednesday's US retail sales figures also gave support to shares of Japanese electronics makers as the robust data spurred optimism about sales of Japanese products during the US holiday shopping season.
"A soft-landing scenario for the US economy, combined with expectations that the Bank of Japan will likely leave interest rates unchanged at its policy meeting, is encouraging investors to buy stocks," said Takahiko Murai, a general manager of equities at Nozomi Securities.
The Japanese central bank is expected to refrain from raising interest rates at its December 18-19 meeting after weak data that has cast doubt on the strength of the economy's recovery. A sharp downward revision in July-September economic growth data, tame price rises and slack personal consumption are seen making it harder for the BoJ to justify a rate hike.
Murai said that given the weak economic data, the BoJ is unlikely to raise rates even if its quarterly tankan report, due out on Friday, shows an improvement in business sentiment. "The Nikkei will regain 17,000 yen if market participants reach the consensus that the economic expansion, despite recent data showing signs of a slowdown, will last long," he said.
The Nikkei rose 136.27 points to 16,829.20, rising for the fourth straight session to hit the highest close since May 11. The broader TOPIX index added 0.77 percent to 1,651.85. Trade volume fell to 1.51 billion shares from 1.62 billion on Wednesday. Advancing shares outnumbered decliners by 892 to 679.
Soichiro Monji, chief strategist at the equity management department of Daiwa SB Investments, said the market will continue to rise until the end of the year as excessive concerns about the economy have faded since some recent economic data, such as industrial production for October, showed strength.
But he is cautious about the market's outlook next year, as US and Asian shares are ripe for correction after staging a record-breaking rally this year. "If overseas markets slip back, it's hard to imagine Tokyo alone will continue to rebound," he said.
Goldman Sachs said in a report on Wednesday that following about 5.5 trillion yen of net purchases of Japanese equities last year, North American investors have sold 102 billion yen this year, and many had reduced their Japan exposure during May-June and raised their weightings elsewhere in Asia and in Europe.
Japan's Internet and telecoms giant Softbank Corp said after the market closed on Thursday it had sold part of its stake in online advertisement company Cyber Communications Inc for 16.2 billion yen ($138 million).
Softbank said it sold 110,000 common shares in Cyber Communications and would book a special gain of 11.2 billion yen from the sale in the third quarter of the year that ends next March.
Besides exporters, Shimadzu Corp jumped 3 percent to 1,050 yen after the precision equipment maker said on Wednesday it would begin selling detection kits later this month for a virus blamed for food poisoning.
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