The Nikkei average rose 0.99 percent on Monday to end at its highest in nearly four months as Canon Inc hit an all-time high on a softer yen and property stocks gained after the central bank governor suggested no rate hikes were imminent.
Kawasaki Heavy Industries Ltd, a supplier to Boeing Co, gained 2.5 percent on news it is considering building a new plant, while Nintendo Co Ltd climbed 2.5 percent after Mizuho Securities raised its target price. After the market closed, Mitsubishi Corp, Japan's biggest trading company, and Australian mining company Murchison Metals Ltd said they would spend more than A$3 billion to develop an iron ore mine in Western Australia.
Bank of Japan Governor Toshihiko Fukui said on Friday he wanted to be more convinced of the sustainability of domestic capital spending and consumption, indicating the central bank was in no hurry to raise interest rates.
There was a rebound in shares of property firms, which often have heavy debts, and consumer finance companies, which had been hit by worries about rising borrowing costs. "There had been caution about rate-sensitive stocks such as property firms, but those stocks are being bought back after Fukui's comment," said Takahiko Murai, a general manager of equities at Nozomi Securities.
The Nikkei advanced 178.03 points to 18,149.52, the highest close since February 26. The broader TOPIX index gained 0.87 percent to 1,788.39. Junichi Misawa, senior fund manager at STB Asset Management, said the market has started to factor in possible rate hikes in coming months. But he added that yields on bonds remain low and are unlikely to encourage investors to switch from equities.
"Higher yields, or higher interest rates, could bring down stock valuations," he said. "But interest rates levels are still low." The benchmark 10-year yield fell to 1.880 percent on Monday, moving away from an 11-month high of 1.985 percent hit last week.
Trade volume was active with 2 billion shares changing hands, compared with daily average volume of 2.2 billion shares in May. Advancers beat decliners by a ratio of more than three to one. Canon added 2.1 percent to 7,330 yen, after earlier climbing as high as 7,390 yen, a record high on share-split basis.