Nikkei rises for fifth day, gains limited ahead of BOJ response

PUBLISHED : Tuesday, 20 November, 2012, 1:20pm
UPDATED : Tuesday, 20 November, 2012, 1:20pm

The Nikkei share average extended its rise into a fifth day on Tuesday, helped by optimism over US fiscal talks, but gains were limited as investors took profits and awaited a Bank of Japan policy decision later in the session.

The benchmark index hit a two-month high the previous day on growing expectations that Japan’s main opposition Liberal Democratic Party (LDP) will win next month’s election and step up pressure on the BOJ to ease monetary policy.

The central bank is expected to keep policy unchanged on Tuesday, having just eased in September and October, but investors will look to see how BOJ Governor Masaaki Shirakawa responds to the increased political heat when he addresses a media briefing following the policy meeting.

Ahead of the December 16 national election, the leader of the LDP, Shinzo Abe, has called on the BOJ for bolder policy action, including “unlimited easing”.

“Investors have started to review what Abe has said and are being careful not to have too many expectations for everything he has said,” said Takuya Takahashi, a market analyst at Daiwa Securities. “The market is sceptical that the BOJ would give in to every demand.”

By the midday break, the Nikkei was up 0.1 per cent at 9,162.08 after rising to as high as 9,200.85. The broader Topix gained 0.2 per cent to 763.67, with volume at 60 per cent of its full daily average for the past 90 trading days.

Market participants said investor sentiment remains upbeat as global stocks surged on Monday to recover some of last week’s sharp losses. There are hopes US lawmakers will reach a deal to avert US$600 billion in tax increases and spending cuts due to start in January – the “fiscal cliff” that threatens to send the US economy back into recession.

Prospects that Greece will get a lifeline to stay solvent also lifted investor’s risk appetite.

“There is more room to rise in the Japanese market as this time, finally, there are signs that lingering problems about the US fiscal cliff and euro-zone debt are headed for a solution,” said Hiroichi Nishi, general manager at SMBC Nikko Securities.

Market players said on Tuesday, the Nikkei may hover near the 9,200 line, which the market has seen as a resistance level for a few weeks.

“After breaching this line, there was a sense of achievement and profit-taking kicked in,” Nishi said.

Shippers led gains, with Mitsui OSK Lines, Kawasaki Kisen and Nippon Yusen rising between 1.9 per cent and 4.1 per cent due to a rise in the Baltic Dry Index , a gauge of rates to transport dry bulk commodities by sea.

Exporters were weak after rallying for the past few sessions, with Honda Motor Co, Canon Inc and Nikon Corp falling between 0.1 per cent and 0.7 per cent.

The Nikkei has rallied 5.68 per cent in the past four sessions, taking its year-to-date gain to 8.25 per cent, trailing a 10.28 per cent rise in the US S&P 500 and a 9.8 per cent advance in the pan-European STOXX Europe 600 index.