Nikkei hits longest winning streak in 15 months

This, after an increasingly soft yen continued to fuel exporters' gains

Japan's Nikkei share average edged up to mark its seventh straight day of gains, its longest winning streak since July 2011, after an increasingly soft yen continued to fuel exporters' gains.

Exporters rose as the yen hit a three-month low of 80.02 to the dollar in the morning session. Sources said the Bank of Japan was leaning towards easing monetary policy again next week, with policymakers discussing steps in addition to a further increase in its asset-buying scheme.

Among exporters, industrial robot maker Fanuc Corp gained 1.9 percent, Nikon Corp rose 1.6 percent and Panasonic Corp added 0.6 percent.

The Nikkei inched up 3.5 points to 9,014.25 after rising as much as 9,075.58, a four-week high.

 

Although the benchmark has lost momentum after last week's steep climb of 5.5 percent, when it logged its best weekly performance in almost a year, some analysts think it could hold on to its gains until the BOJ meeting on October 30.

"Unless the yen suddenly strengthens or the Nikkei snaps its 75-day moving average, which is around 8,855 today, it will continue to be strong. If it falls before that it's more likely to be an adjustment than an authentic reversal," said Yoshihiro Ito, chief strategist at Okasan Online Securities.

"However, it remains to be seen whether earnings have really been priced in or not."

The benchmark sagged 3.7 percent two weeks ago on fears that most Japanese companies would cut their forecasts as sales are hit by a global slowdown and particularly weak demand in China, where a territorial dispute provoked boycotts of Japanese goods.

But last week's gains indicated that many investors thought the sell-off was overdone, as they bought back even companies that cut annual guidance as the cuts were not as deep as feared.

"We are in the middle of a range here - 8,500 would probably be a buy, 9,200 would probably be a sell without any real move on the currency. If the currency gets through 80 (yen to the dollar) convincingly, that changes a lot of things," said a senior trader at a foreign bank.

He added the flows were light, indicating investors were "a bit confused" over the direction of the market after recent gains.

The trickle of profit reports on Tuesday as Japan's earnings season shifts into a higher gear continued to move individual stocks. Fuji Heavy Industries Ltd <7270.T> climbed 3.8 percent to a 20-month high after lifting its operating profit forecast for the final half ended September by 34 percent.

Kagome Co Ltd fell 2.9 percent to a three-month low, after the ketchup and tomato products manufacturer cut its operating profit forecast, after previously hiking it in July as a tomato diet became popular in Japan, helping the stock to a three-year high in September.

The outlook for Japanese corporate earnings remains weak. According to Thomson Reuters Datastream, Japanese companies' one-month earnings momentum - analysts' earnings upgrades minus downgrades as a total of estimates - has deteriorated further to -12.2 percent from -6.7 percent last month.

The pace of deterioration for the S&P 500 is not as pronounced. It worsens to -3 percent from -2.3 percent in September, according to Datastream.

The benchmark Nikkei is up 6.6 percent this year, lagging a 14 percent rise in the U.S. S&P 500 and an 11.6 percent gain in the pan-European STOXX Europe 600 index.

Iinvestors lock in gains

The broader Topix index lost 0.6 percent, which analysts attributed to profit-taking after the index's 5 percent gain last week.

Hitachi Ltd <6501.T> dropped 3.4 percent and was the third-most traded stock on the main board after outperforming the benchmark with a gain of 8.9 percent last week.

Utilities lost 6.7 percent, the weakest subindex of the day, after local media said Kansai Electric Power Co Inc <9503.T> will not pay its previously forecast annual dividend of 60 yen for the year ending in March 2013, due to soaring costs of imported oil and gas as the majority of its nuclear reactors remain offline.

Kansai Electric Power sank 12.9 percent.

"I think the stock price will recover. I can't imagine there were too many shareholders actually thinking they were going to pay a dividend when they are so far in the red," said Hiroyuki Mutsuro, head of execution support at Mizuho Securities.

Kansai Electric, which derived 50 percent of its power from nuclear before its reactors were taken offline for routine checks following the accident at the Fukushima nuclear plant last year, was expected to report a net loss of 125 billion yen for the six months ended in September, according to Jiji news agency.