The Nikkei average climbed 3.2 percent on Tuesday as banks extended gains on improved sentiment about the global financial system and mounting hopes for fresh steps as the US and Japanese central banks head into policy meetings. With a series of short-covering moves helping the market keep its upward momentum, the benchmark Nikkei has so far recovered more than a third of the fall it booked between the high point hit in early January and the trough it touched last week.
Toyota Motor Corp and other battered exporter shares climbed. The Nikkei business daily also said Toyota plans to slash the price of its current generation Prius hybrid car by 19 percent to $19,250, matching rival Honda Motors hot-selling Insight.
"A short-cover rally continued on growing hopes for the outcome of the FOMC and BoJ meetings, coupled with the G20 meeting, as monetary policy steps will likely have a more immediate impact than fiscal policy," said Mitsushige Akino, chief fund manager at Ichiyoshi Investment Management. "If they unveil some fresh steps it will likely buoy the market further.
If the Nikkei were to break above the 8,000 mark as a result, investors couldnt avoid further covering of short positions. In other words, those who want to sell are now cautious." In active trade, the benchmark Nikkei gained 244.98 points to 7,949.13, its highest finish since February 9.
The broader Topix advanced 2.6 percent to 760.64. Japanese banking shares took heart from rises by Bank of America and Citigroup, coupled with hopes for the results of two-day meetings of the Bank of Japan and the Federal Reserve, both of which start on Tuesday.
Finance Minister Kaoru Yosano has backed a US call for governments to pump more money into their economies and said on Friday the Japanese government would have the outline of a new economic package ready by the G20 leaders summit in London in April. Mitsubishi UFJ Financial Group, Japans top lender, surged 8.2 percent to 477 yen and No 2 Mizuho Financial Group jumped 5.8 percent to 200 yen.
Sumitomo Mitsui Financial Group, Japans third-ranked bank, shot up 7.6 percent to 3,250 yen. Shares of Mitsui Fudosan Co and other property developers gained after data showing that the number of unsold apartments in the Tokyo metropolitan area fell below 10,000 in February for the first time in 15 months.
Mitsui Fudosan climbed 6.1 percent to 1,074 yen, while Mitsubishi Estate gained 5.6 percent to 1,109 yen and Sumitomo Realty & Development surged 8.2 percent to 1,017 yen. Shares of Toyota advanced 2.4 percent to 3,010 yen, while Honda climbed 3.3 percent to 2,320 yen. Other exporters also rose, with electronic parts maker Kyocera Corp jumping 5.3 percent to 6,750 yen.
Among stocks that fell, Kao, Japans largest household products maker, shed 3 percent to 1,836 yen after the Nikkei business daily reported it is likely to book a 14 percent drop in annual group operating profit due to lacklustre sales of makeup and chemical products. Kao was the top drag on the Nikkei 225. Some 2.3 billion shares changed hands on the Tokyo exchanges first section, compared with last weeks daily average of 2 billion. Advancing stocks outpaced declining ones by more than 2 to 1.