Japanese stocks closed at their highest in nearly two weeks on Tuesday as investors picked up recently pressured shares such as Sony Corp, encouraged by a softening yen and after news from Merrill Lynch prompted a rally on Wall Street. Nippon Yusen KK and other shippers powered higher after the Nikkei daily reported a big rise in container rates.
But trade was thin and gains were limited as many institutional investors were away for Christmas holidays. So far this year, the Nikkei average has lost 9.7 percent, while it ended 2006 with a 6.9 percent gain for the year.
Koichi Ogawa, chief portfolio manager at Daiwa SB Investments, said sell-off pressure seems to be disappearing although the market still lacks strength to advance much further.
"There isn't much reason to sell stocks with institutional investors away on holidays, New York stocks rebounding and the dollar solid," he said. The Nikkei average could test 16,000 by the end of the year, he said.
"But scepticism lingers even if the New York market is strong because not everything has become clear and recession concerns remain." The benchmark Nikkei average ended the day up 1.9 percent or 295.59 points at 15,552.59, the highest close since December 12.
The broader TOPIX index gained 1.8 percent or 26.83 points to 1,496.03, its highest finish since December 14. The Tokyo market had a full-day session on Tuesday, while most Asian markets, including Hong Kong and Singapore, were closed for Christmas.
The dollar was down 0.3 percent at 114.00 yen stepping back from 114.49 hit on Monday on electronic trading platform EBS, its highest since November 7. US stocks rallied on Monday, led by financial companies after Merrill Lynch shored up its capital base by as much as $7.5 billion.
Despite the gains, Tsuyoshi Segawa, an equity strategist at Shinko Securities, said subprime problems still dictate the direction of the US market. "The focus will shift to the fallout on real economies next year," he said. Christmas Day trade was thin on the Tokyo exchange's first section, with 1.4 billion shares changing hands compared with last month's daily average of 2.3 billion.
Turnover hit this year's lowest at 1.6 trillion yen. Advancing stocks outnumbered decliners by a ratio of more than two to one. A softer yen benefits shares of exporters as it boosts profits when earnings from abroad are brought home.
Shares of Sony climbed 4.1 percent to 6,360 yen, while Kyocera Corp gained 2.1 percent to 10,020 yen and Fanuc Ltd advanced 3.4 percent to 11,070 yen. Other recently sold shares such as property firms also gained. Sumitomo Realty & Development Co Ltd surged 5.9 percent to 2,885 yen, while Mitsubishi Estate Co Ltd jumped 5.6 percent to 2,730 yen and Mitsui Fudosan Co Ltd climbed 4.8 percent to 2,510 yen.