Investors upbeat about Tokyo shares

25 Jun, 2007

Investors are upbeat about Japanese share prices as a weak yen was expected to boost the performances of companies in the April-June quarter, dealers said on Friday.
For the week to June 22, the Tokyo Stock Exchange's Nikkei-225 index of leading shares jumped 217.14 points or 1.21 percent to 18,188.63, after on Thursday hitting a seven-year high of 18,240.30.
The broader Topix index of all first-section shares gained 5.05 points or 0.28 percent to 1,777.99. Investors are beginning to focus on earnings for the first quarter of the financial year to March 2008, as local media will start speculating on the results as early as next week, analysts said.
"There is an optimistic mood among investors, as earnings are expected to be generally good, partly helped by the cheaper yen against major currencies," said Fujio Ando, a fund manager at Chiba Bank Asset Management.
"Most Japanese companies assume the exchange rate at about 115 yen to the dollar and about 150 yen to the euro, in contrast to the current level of the yen, which is much cheaper," he said.
The yen has been at multi-year lows against other major currencies for the past week after the Bank of Japan signalled it was in no hurry to lift super-low interest rates.
"The market has continued to be underpinned by the softer yen trend, which is supporting expectations of higher earnings for exporters like high-tech companies," SBI Securities strategist Hideyuki Suzuki said. "That augurs well for a solid economic recovery in Japan," he said.
Analysts said the fall in Friday's trade showed only that investors wanted a breather after recent rapid rises. "Geopolitical risks linked to North Korea are also receding while the prospects of the global economy remain positive," added Ando of Chiba Bank Asset Management.
"At least no head-to-head confrontation between North Korea and the United States is likely to come in the very near future," he said. The US chief negotiator on North Korea, Christopher Hill, paid a rare visit to the communist state on Thursday and Friday and said he believed Pyongyang was prepared to shut its nuclear reactor.
For the coming week, investors will also closely watch global rises in bond yields and prepare for the Bank of Japan's closely watched quarterly Tankan survey out on July 2.

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