Tokyo stocks rose 1.28 percent to a new seven-year high on Thursday as the dollar surged against the yen following a rally on Wall Street. The Nikkei 225 index at the Tokyo Stock Exchange gained 206.69 points to finish at 16,374.14, its highest close since November 2007. The Topix index of all first-section issues was up 1.53 percent, or 20.25 points, at 1,346.43.
Exporters were the main beneficiaries as the dollar broke through the 109-yen mark in New York after data showed US new home sales hit a six-year high in August. The greenback was changing hands at 109.21 yen, up from 109.04 yen in US trade and 108.52 yen in Tokyo earlier Wednesday. The Japanese market has been on the upswing lately, following Wall Street's record closes and a surging dollar-yen rate, with the nation's second-largest bank piling into shares.
"Weak Japanese share prices and a strong yen are finally being corrected," Seiichiro Takahashi, head of market operations for Sumitomo Mitsui bank, told the Wall Street Journal. "Bonds aren't suited for us at all currently." The shift underscores a move by Japanese financial institutions to dump low-yielding domestic bonds in favour of stocks, while the country's massive public pension fund eyes rejigging its bond-heavy portfolio.
However, analysts warned about the impact of a too strong dollar rally. "The dollar's continuing strength flies in the face of diverging opinions about the benefits of its rise, as a too-strong greenback is not good for US exporters and also not good for Japan which currently is so reliant on imported fossil fuels," said Daisuke Uno, strategist at Sumitomo Mitsui Banking.
Japan's fossil fuel imports soared after the 2011 Fukushima nuclear crisis forced the closure of nuclear reactors that once supplied more than a quarter of the country's power. In Tokyo share trading exporters were higher, with Toyota closing up 1.97 percent at 6,550.0 yen and Sony rising 1.44 percent to 1,901.0 yen. Panasonic advanced 1.30 percent to 1,320.0 yen after the leading Nikkei business daily said the firm plans to take a near 50 percent stake in major Spanish auto parts manufacturer Ficosa International.