GET IN ON THE JAPANESE RECOVERY

Japan's Nikkei, Topix May Rise, Extending Rally; Canon May Gain

Dec. 29 (Bloomberg) -- Japanese stocks may extend a rally that's driven indexes to more than five year highs after reports showed U.S. consumer confidence and retail sales increased more than expected. Exporters such as Canon Inc. may lead the advance.

``Shares are likely to be supported by good holiday season sales in the U.S.,'' said Juichi Wako, strategist at Nomura Securities Co. in Tokyo. ``Strong buying momentum for Japanese stocks still persists.''

A rise in the dollar against the yen may also propel gains for companies that rely on U.S. sales, as a weaker local currency boosts the value of their overseas sales.

Nikkei 225 Stock Average futures expiring in March traded at 16,265 in Chicago, higher than closes of 16,240 in Osaka and 16,255 in Singapore. Yesterday, the Nikkei gained 1.4 percent to 16,194.61, the highest since Sept. 21, 2000. The Topix index added 1 percent to 1653.92, the highest since May 10, 2000.

Metals producers such as Dowa Mining Co. and oil explorers including Inpex Corp. may gain after prices of copper, gold and crude oil advanced.

For the year, the Nikkei has surged 41 percent, the biggest annual advance since a 44 percent gain in 1986. The Topix has jumped 44 percent, the most since 1999.

Companies that rely on U.S. sales may lead the Nikkei and the Topix in trading today on expectations that rising consumer confidence and an increase in holiday sales in Japan's biggest export destination will lead to higher overseas revenue.

Exporters

Canon, the world's largest seller of digital cameras, generated 75 percent of its sales from overseas last year. Honda Motor Co., Japan's third-largest automaker, gets as much as 70 percent of its operating profit from the U.S.

U.S. stocks rallied after the Conference Board said its gauge of consumer confidence increased to 103.6 in December from 98.3 in November. The reading, based on a survey of 5,000 households, climbed the highest since August and exceeded the median estimate for a 103 reading in Bloomberg News survey.

Retail sales in the U.S. increased 3.9 percent in the week ended Dec. 24, faster than the 2.8 percent gain in the previous week, the International Council of Shopping Centers said.

Sales at mall-based and shopping-center chains have risen a weekly average of 7.4 percent this month, according to ShopperTrak RCT Corp.

Exporters may also get a lift after the dollar advanced to 117.85 yen in New York from 117.44 late yesterday, according to currency-dealing system EBS. A stronger U.S. currency inflates the yen value of exporter's dollar-denominated revenue.

Commodity Prices

Commodity producers may also advance, led by Dowa Mining, Japan's No. 5 copper smelter that also produces gold, and Inpex, Japan's largest oil explorer.

Copper futures rose to $2.069 a pound in New York, the second-straight day the metal closed at a record. Gold futures for rose to a two-week high, while crude oil prices jumped 3.5 percent to $60.20 a barrel.

Inpex will spend as much as 200 billion yen ($1.70 billion) to develop an oil field in Iran next year, the Asahi newspaper reported, citing a company executive it did not name.

Yoshinoya D&C Co., which operates a restaurant chain specializing in beef dishes with rice, may drop. The company posted a nine-month loss of 528 million yen after Japan's ban on the import of the meat from the U.S. increased costs. The loss compares with a 1.82 billion yen profit a year earlier.



To contact the reporter on this story:
Michael Tsang in Tokyo at mtsang1@bloomberg.net;
Makiko Suzuki in Tokyo at msuzuki13@bloomberg.net.
Last Updated: December 28, 2005 18:20 EST