TOKYO, Mar 4: Japan’s Nikkei average climbed to a 53-month high on Monday as real estate firms and financials advanced on expectations of aggressive easing from the new leadership team at the central bank.
The Nikkei rose 0.6 percent to 11,674.90 by the midday break, eclipsing the previous 53-month high of 11,662.52 hit on Feb. 25. It rose as much as 1.4 percent to 11,767.68 earlier in the session.
‘Foreign investors still have high expectations for Abenomics and Japan’s (monetary) policies under the new leadership,’ said Yoshihiko Tabei, general manager of capital markets research at Kazaka Securities, referring to Prime Minister Shinzo Abe’s reflationary fiscal and monetary policies.
On Monday, Haruhiko Kuroda, the government’s nominee to be the next Bank of Japan governor, said huge purchases of longer-dated Japanese government bonds is a natural way to ease monetary policy, although central bankers must monitor the side-effects.
Kuroda added the size and type of assets the BOJ now buys is not enough to achieve its 2 percent inflation target.
‘Some investors may sell stocks if Kuroda and (nominee to be one of the deputy governors Kikuo) Iwata, who will speak at the parliament on Tuesday, don’t say anything beyond their expectations. Yet, there should be other players buying stocks on the dip.’
The real estate sector was the top performer, gaining 4.9 percent. Sumitomo Realty & Development jumped 5.6 percent and Mitsubishi Estate climbed 5.1 percent.
The sector has climbed more than 57 percent since mid-November, outpacing a nearly 38 percent rally in the Nikkei, after Abe embarked on bold fiscal expansionary policies to fight Japan’s chronic deflation.
Securities firms, banks and other financials also outperformed the overall market.
The broader Topix index gained 1.1 percent to 995.21, while some exporters also got a helping hand from a weaker yen, which lost 1 percent to 93.685 to the dollar on Friday after the upbeat U.S. Data.
U.S. Manufacturing activity expanded last month at its fastest clip in 20 months, while U.S. Consumer sentiment also rose in February as Americans turned more optimistic about the job market.
The Japanese currency was quoted at 93.33 to the dollar on Monday. Sony Corp rose 3.7 percent.
UBS upgraded Japanese equities to ‘neutral’ from ‘underweight’ in its global portfolio model.
‘Whilst we are relatively sceptical on the ability of the administration to generate inflation and economic growth, we see a likely period of continued reflationary rhetoric and supportive news flow ahead of the summer elections for the upper house,’ UBS strategists said in a note.
‘The broader improvement in the U.S. Economy and pick up in durables goods orders should help Japan, particularly with the weaker yen, over a longer-term horizon.’ (AGENCIES)
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