Nikkei hits 15-year high on earnings, shareholder returns hopes

Financial and real estate companies lead the gains

Japanese stocks edged up to hit a 15-year high on Monday, with financial and real estate companies leading the gains, as investors bet on steady improvement in the Japanese economy and increased shareholder returns.

The Nikkei share average rose 0.3% to 19,309.23, hitting a 15-year intraday high at one point and extending its gain so far this year to almost 11%, outpacing many other markets.

"The market has been experiencing the best earnings estimate revisions of all the major markets. And I expect robust earnings growth to continue for the next 18-24 months," said Tristan Hanson, head of asset allocation at Ashburton Investments in London.

Domestic demand-oriented shares, such as banks and real estate companies shone on Monday, as Japan is seen as one of the biggest beneficiaries of weak oil prices, with the country's net oil imports at 4.2% - the highest ratio among major developed countries.

Bank shares gained 1.6%, the top performer among the Tokyo Stock Exchange's 33 industry subindex. Mitsubishi UFJ Financial Group rose 2.0% and Sumitomo Mitsui Financial Group climbed 2.3%.

Real estate company shares broke above their November peak to hit the highest level since January last year.

Mitsubishi Estate gained 1.4% while Mitsui Fudosan rose 1.2%.

"Rises in bank and other domestic demand-oriented shares symbolises an improved confidence that the economy is getting out of deflation," said Takashi Hiroki, chief strategist at Monex Securities.

Investors are also becoming more optimistic on higher shareholder returns after industrial robot maker Fanuc, long known for its limited engagement with shareholders, said last week it is considering dividend hikes and more dialogues with investors.

Fanuc added 0.6% to hit a new record high, after its massive 13.2% gain on Friday.

The improved mood has also been underpinned by expectations that Japanese public investors, such as the $1.1 trillion Government Pension Investment Fund and Japan Post, will keep increasing stock investment under the auspices of Prime Minister Shinzo Abe.

Officials said on Saturday that the government plans to name the currency head of the GPIF, Takahiro Mitani, to another term as the fund's chairman.

The broader Topix rose 0.2% while the JPX-Nikkei Index 400 also advanced 0.2%.

Investors took profits in other recent gainers such as drugmakers, with pharmaceutical companies down 0.9%.