Tokyo stocks surged Tuesday, extending a global equities rally with a weaker yen lifting exporters as investors shrugged off failed talks to cut oil output. Tokyo's benchmark index had plunged 3.4 percent Monday as energy firms were hit by tumbling crude prices as a supply glut returned while worried traders rushed for safe-haven investments including the yen, putting pressure on exporters. Two deadly earthquakes in southern Japan at the end of last week also forced major firms including Toyota and Sony to close factories, fuelling worries about their impact on the wider economy.
However, worries about crude eased later on Monday, and US and European markets ended in positive territory. "The concerns we had yesterday were perhaps too extreme and didn't spread to US markets," Toshihiko Matsuno, chief strategist at SMBC Friend Securities, told Bloomberg News.
This "is leading to a sense of relief as oil prices recovered at the bottom", Matsuno added. The pick-up in optimism and hopes for fresh measures by the Bank of Japan following the double quake saw a move out of the yen. In afternoon trade the dollar rose to 109.04 yen from 108.83 yen in New York, and well up from the levels below 108 yen seen in Tokyo earlier Monday.
A weaker yen boosts Japanese exporters' profitability and tends to spur interest in their shares. "We now have concerns that the economic impact from the Kumamoto earthquake could become larger, which is leading to expectations of further easing from the Bank of Japan," SMBC Friend Securities' Matsuno said.
By the close, the Nikkei 225 soared 3.68 percent, or 598.49 points, to 16,874.44, while the broader Topix index of all first-section shares jumped 3.25 percent, or 42.88 points, to 1,363.03. Japan's central bank could decide as early as next week to expand its already massive asset-buying programme, as Prime Minister Shinzo Abe's drive to kick-start the world's third-largest economy stutters.
On Tuesday, Tokyo revealed it will nominate 51-year-old banker Takako Masai to the central bank's board to replace a policymaker whose term is set to expire by the end of June, Bloomberg News said. Although some of Toyota's and Sony's production lines on the south-western island of Kyushu remained offline in the wake of the powerful quakes that killed 44 people, their stock rebounded strongly.
Toyota was 3.89 percent higher at 5,680 yen while Sony soared 6.48 percent to 2,913.5 yen. Honda Motor tacked on 4.46 percent to 3,078 yen. Uniqlo operator Fast Retailing, a market heavyweight, advanced 6.39 percent to 29,870 yen. Energy firms picked up after Monday's losses. Inpex advanced 2.66 percent to 852.2 yen and JX Holdings was up 1.75 percent at 463.4 yen.