TOKYO — Japan’s Nikkei average surged 3.8 percent Wednesday, closing at its highest point since October 2008, after the yen fell sharply amid expectations of a more aggressive economic policy.
The benchmark rose 416.83 points to 11,463.75, its biggest one-day gain since March 2011, as the Japanese currency dropped to 94.08 against the dollar.
On Tuesday, Masaaki Shirakawa, the governor of the Bank of Japan, said he would step down, along with his two deputies, in March, three weeks before the scheduled end of his five-year term.
Prime Minister Shinzo Abe has put the central bank under relentless pressure to do more to pull the economy out of the doldrums. Mr. Shirakawa’s announcement opened the way for him to quickly appoint a governor who would be bolder in loosening monetary policy.
“There was a very aggressive, solid weakening of the yen in response to what seems like relatively trivial news,” said Stefan Worrall, director of equity sales at Credit Suisse in Tokyo. “But it’s nonetheless news that signals the expectation and recognition that the momentum in Japan is continuing to favor yen weakening,”
Although investors have seen the weak yen as a boon for exporters over the last two and a half months, Mr. Worrall said, there are other benefits to a more competitive exchange rate.
“On a U.S. dollar basis, Japan has yet to break out, particularly if you compare its rally with rallies” in Germany and Australia, he said.
Indeed, brighter profit forecasts from the likes of Toyota Motor and Mitsubishi Heavy Industries helped sustain the optimistic mood Wednesday. Their gains stemmed from the weaker yen, which inflates the value of earnings from overseas.
Toyota climbed 6.1 percent and was the most-traded stock by turnover on the main board, and Mitsubishi Heavy rose 10.4 percent, with both stocks hitting their highest levels since autumn 2008.
Expectations of a new central bank governor also helped inflation-sensitive shares, as the central bank signed onto a new 2 percent inflation target last month with the government. On Wednesday, the real estate sector advanced 4 percent.
Norihiro Fujito, senior investment strategist at Mitsubishi UFJ Morgan Stanley, said the central bank might start “open-ended” asset buying in April, well before the 2014 start the central bank committed to at its last policy meeting.
Mr. Fujito said he saw Kazumasa Iwata, a former Bank of Japan deputy governor and a vocal supporter of an asset purchase fund of ¥50 trillion, or $530 billion, as the most likely candidate to succeed Mr. Shirakawa.
Others seen as possible candidates are Haruhiko Kuroda, president of the Asian Development Bank, and Heizo Takenaka, who a decade ago was an economics minister.
Article source: http://www.nytimes.com/2013/02/07/business/global/japans-nikkei-average-surges.html?partner=rss&emc=rss
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