The Nikkei stock average rose on Tuesday as robust quarterly earnings and higher profit forecasts from the likes of digital camera and copier maker Canon Inc helped offset a yen that has strengthened on US debt woes. Japanese corporate results and smaller Wall Street losses than expected on the deadlocked debt talks encouraged short-covering with sporadic buying by Asian investors detected, market players said.
The Nikkei, however, did not quite regain all the losses it made the previous day. "Investors are confident that Japanese companies can generate profits even with current foreign exchange rates," said a portfolio manager at a US asset management firm, who declined to be quoted by name.
The benchmark Nikkei rose 0.5 percent at 10,097.72 and the broader Topix index also gained 0.5 percent, to 866.20. The Nikkei is not that far from a four-month intraday high of 10,207.91 hit this month, a break of which could open the way for a return to pre-quake levels a bit above 10,250 - although many don't expect that break just yet. Worries about a deadlock in talks to raise the US debt ceiling are making investors increasingly nervous, although most expect lawmakers to clinch a deal before the August 2 deadline.
Those worries have driven the yen towards a record high against the dollar, denting optimism that manufacturers, whose exports are undermined by a strong Japanese currency, will continue to recover steadily from the damage caused by the March 11 earthquake. Canon rose 2.6 percent to 3,885 yen and was the second most actively traded stock by turnover, after it posted better-than-expected quarterly profits and raised its annual forecast following a rapid recovery from supply chain woes triggered by the March 11 earthquake.
Kao Corp surged 4.7 percent to 2,262 yen after the household goods maker raised its full-year outlook and posted a 12 percent rise in April-June operating profit on brisk sales of its chemical products overseas and an earlier-than-expected recovery in domestic sales after the quake.
Traders said the Nikkei was likely to be supported above its 200-day moving average, now around 9,916, as Japan's earnings season kicks into high gear next week, with expectations high for results to show more evidence of a recovery from the quake. Some analysts said further improvements in earnings outlooks were necessary for the Nikkei to recover to pre-quake levels.
Utilities underperformed the market after the Nikkei business newspaper reported that fuel costs at Japan's five largest electric power companies are expected to surge a combined 2 trillion yen ($25.5 billion) this fiscal year as they rely on fossil fuel-fired plants to make up for capacity lost from offline nuclear reactors. Chubu Electric dropped 1.1 percent to 1,420 yen and Tokyo Electric Power shed 4.3 percent to 512 yen.