The Japan Thread

Friday December 30, 03:00 AM
Sun rises again on Japanese dream

JAPAN'S key Nikkei (news) stock index climbed to a new five-year high yesterday for the second consecutive day, consolidating expectations of a fully-fledged recovery for the Japanese economy.
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On the last full day of trading on the Tokyo Stock Exchange before the new year holiday, the 225-issue Nikkei Stock Average rose 149.59 points, or 0.92 per cent, to 16,344.20, its highest finish since September 2000. The Tokyo Stock Price Index of all First Section issues on the Tokyo Stock Exchange gained 9.83 points, or 0.59 per cent, to 1,663.75, a level unseen since May 9, 2000.

Brokers said that the yen's fall against the US dollar and overnight modest gains in US shares also prompted buying, buttressing the already bullish market.

Other supportive factors included fresh demand for stocks for newly established investment trusts, brokers said.

Hiroichi Nishi, equities chief at Nikko Cordial Securities, said investors had strong interest in buying on dips, owing to high hopes for a steady rise in Tokyo share prices in the next year.

"Without concerns over signs of overheating, there is no reason to sell," he said.

Advancing issues outnumbered declining ones 921 to 644, with 102 shares ending unchanged.

Trading volume on the TSE's main section rose to 1,903.80 million shares from Wednesday's 1,654.80 million shares.

The TSE's second section index gained 63.62 points, or 1.25 per cent, to 5,140.97 on a volume of 101.10 million shares. In Osaka, the near-term March Nikkei 225 index futures contract climbed 120 points to 16,360.

The news follows stronger than expected data on consumer prices, which rose 0.1 per cent in November.

Japan's economy has rebounded as an increase in capital investment and consumer spending, on the likes of cars and electronics, has made up for a slowdown in exports.

However, exports may now be getting stronger too, thanks to increased demand from China.

Further data showed industrial output rose 1.4 per cent in November, as plants and factories boosted production for a fourth consecutive month, reaching historically high levels.

"We can say the economy has finally emerged from a soft patch," said Akiyoshi Takumori, chief economist at Sumitomo Mitsui Asset Management.

As well as overseas investors, home-based individual investors are becoming more active, boosted by seasonal bonuses, which are a major component in annual salaries. "Everyone's bonuses were a little bit better this year, and they've seen the value of their assets increase, so if you go to an electronics store now there are a lot more people," said Hiroyuki Nakai, chief strategist at Tokai Tokyo Securities.

The Paris-based Organisation for Economic Co-operation and Development expects Japan's economy to grow 2.4 per cent this year and 2 per cent in 2006, up from previous forecasts for 1.5 per cent growth in 2005 and 1.7 per cent next year.