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updated: 12/17/2012 5:45 AM

Japan's Nikkei 225 advances to highest since April

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  • A woman walks by a world stock index display of a securities firm in Tokyo Monday, Dec. 17, 2012. Japan's Nikkei 225 index jumped 1.6 percent to 9,891.15, its highest level since April, after the country's Liberal Democratic Party swept back into power at weekend elections.

      A woman walks by a world stock index display of a securities firm in Tokyo Monday, Dec. 17, 2012. Japan's Nikkei 225 index jumped 1.6 percent to 9,891.15, its highest level since April, after the country's Liberal Democratic Party swept back into power at weekend elections.
    Associated Press

 
Bloomberg News

Japanese shares gained, with the Nikkei 225 Stock Average heading to its highest close in eight months, after the Liberal Democratic Party reclaimed power in a landslide yesterday, lifting optimism for an economic recovery.

Fast Retailing Co., Asia's biggest clothing retailer, gained 3.5 percent. Honda Motor Co., an automaker that counts North America as its biggest market, gained 1.3 percent after the yen weakened against the dollar. Tokyo Tatemono Co., a property developer, increased 7 percent. Asahi Glass Co. sank 2.7 percent after the Nikkei newspaper said the company may miss its profit forecast.

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The Nikkei 225 rose 1.4 percent to 9,877.07 as of 9:46 a.m., its highest since April 3. The measure has gained 14 percent since Nov. 14, when elections were announced. The LDP has called for more monetary easing and a doubling of the nation's inflation goal. The broader Topix Index climbed 0.9 percent to 808.48, with all but one of its 33 industry groups gaining.

"The market hasn't priced in this kind of a landslide win," said Hideyuki Ishiguro, senior strategist at Okasan Securities Co. in Tokyo. "There's more certainty that LDP will make progress in deflation-fighting agenda. This could be a turning point for Japanese stocks."

The LDP yesterday captured 294 seats in the 480-member lower house of parliament, while Prime Minister Yoshihiko Noda's Democratic Party of Japan lost three-fourths of its lawmakers, according to public broadcaster NHK's vote count. LDP leader Shinzo Abe, 58, is set to replace Noda, returning to the office he left five years ago for health reasons.

Economy Reeling

Japan's economy, still reeling from last year's record earthquake and nuclear disaster, last quarter fell into its fifth technical recession in 15 years, while confidence among the country's largest manufacturers slid to the lowest level in almost three years, according to the Bank of Japan's quarterly Tankan index.

The Japanese yen weakened to the lowest level against the dollar since April 2011 on bets Abe's victory in Japan's general election adds to the case for the nation's central bank to expand stimulus as early as this week.

"This is going to have a tremendous impact on the fortunes of Japanese exporters and the economy," Ed Rogers, chief executive officer at Tokyo-based Rogers Investment Advisors, said in a Bloomberg Television interview today. "The moves in the dollar-yen indicate that the world at large believes that we're starting on the path to reflation."

The Topix trades at 0.96 times book value, compared with 2.1 for the Standard & Poor's 500 Index and 1.5 for the Europe Stoxx 600 Index. A number less than one means that companies can be bought for less than the value of their assets.

U.S. Stock Futures

S&P 500 futures fell 0.2 percent today. The gauge dropped 0.4 percent on Dec. 14, the first weekly decline in a month, as budget talks outweighed the Federal Reserve's plan to expand bond purchases and better-than-estimated economic data.

The Nikkei 225 is headed for a 17 percent gain this year, its best annual performance since 2009, when the measure increased 19 percent. The measure's 14-day relative strength index is at 79 today, its highest level since March 2.

The Nikkei Stock Average Volatility Index sank 6.6 percent to 18.20 today, indicating traders expect a swing of about 5.2 percent on the benchmark gauge over the next 30 days.

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