Tokyo stocks closed at their highest level in over seven months on Tuesday with the benchmark Nikkei index adding 1.24 percent as a sharp drop in the yen lifted exporter shares. The Nikkei rose 192.00 points to 15,668.60, its best finish since late January, while the Topix index of all first-section shares climbed 1.09 percent, or 13.94 points, to 1,297.00.
Wall Street was closed Monday for the Labour Day weekend, while European markets saw a soft close on the back of poor manufacturing figures that fuelled speculation of fresh monetary easing by the European Central Bank (ECB). The Nikkei shrugged off the tepid lead from Europe as the dollar jumped against the yen - a plus for Japanese exporters - with investors also looking ahead to US jobs data later in the week.
Among the factors pushing down the yen were growing expectations that the Bank of Japan would move to support the economy at a meeting this week after recent data point to weakness in the world's number three economy. The greenback jumped to 104.82 yen in Asian currency markets - its highest since January - from 104.27 yen in European trade.
"There is speculation that the Bank of Japan may go ahead with additional easing, but that's not the main factor behind today's trade," said Yosuke Hosokawa, head of Sumitomo Mitsui Trust Bank's forex sales team. "Selling pressure on the euro ahead of the ECB meeting pushed up the dollar, which maintained its strength against other currencies, including the yen. Plus, it's hard for players to sell the dollar ahead of the payroll figures this week, which is also sustaining the dollar's strength."
Dealers said there were also growing hopes that Prime Minister Shinzo Abe's expected cabinet shuffle would see Yasuhisa Shiozaki put in charge of the health, labour and welfare ministry, which oversees Japan's massive public pension fund. Shiozaki is reportedly in favour of shifting more of the bond-heavy fund's assets into stocks. "Hopes for the GPIF (Government Pension Investment Fund) reform helped push up the Nikkei," Yuji Saito, executive director of foreign exchange department at Credit Agricole in Tokyo, told Dow Jones Newswires.
Sentiment was also lifted by upbeat wage growth data, which showed workers' pay in July rose at its fastest pace in more than 17 years. Toyota jumped 1.74 percent to 6,060.0 yen on the weak yen and data showing it posted robust sales in China last month. Canon climbed 0.75 percent to 3,420.0 yen, while Sony firmed 0.17 percent to end at 2,019.0 yen.