Nikkei rises to fresh 8-year high on U.S. rally; eyes on BOJ decision

* Event-driven funds seen buying banking shares before BOJ decision – analyst * Nikkei’s next target seen at 18,261.98 – analysts By Ayai Tomisawa TOKYO, Feb 18 (Reuters) – Japan’s Nikkei share average rose to a fresh eight-year high on Wednesday morning after U.S. stocks rallied on hopes that a debt deal would be reached with Greece, while eyes are on the policy decision by the Bank of Japan, which is widely expected to keep its policy on hold.

The Nikkei gained 1.0 percent to 18,164.84 in mid-morning trade after rising as high as 18,169.07, the highest level since July 2007. The next upside target as a closing level is seen at 18,261.98, which was marked in early July 2007, analysts said.

Greece will remain an immediate concern for financial markets as the European Central Bank decides later in the day whether to maintain emergency lending to Greek banks which have lost deposits at an unnerving rate.

The BOJ is set to maintain its massive asset buying stimulus spree on Wednesday and revise up its view on output, even as data showing only a feeble recovery from recession tempers its optimism.

“A hundred out of a hundred people expect that the BOJ will stand pat on policy, however, event-driven funds have been piling up long positions in stocks sensitive to easy policy,” said Norihiro Fujito, senior investment strategist at Mitsubishi UFJ Morgan Stanley Securities.

Fujito said that such short-term investors are seen buying financial stocks and real estate stocks before the BOJ’s policy meeting, but they may reserve their positions when the decision is out.

The banking sector, which has gained 7.6 percent over the past week, added 2.3 percent on Wednesday, with Mitsubishi UFJ Financial Group rising 2.3 percent and Sumitomo Mitsui Financial Group advancing 2.6 percent.

The real estate sector, which has risen 6.1 percent over the same period, gained 1.0 percent, with Mitsui Fudosan Co rising 1.1 percent and Sumitomo Realty & Development Co gaining 1.5 percent.

Over the same term, the Nikkei has risen 2.9 percent.

Overall sentiment was upbeat as the yen weakened to 119.22 yen to the dollar, stepping back from Monday’s high of 118.11 yen. 31 of Topix’s 33 subsectors were in positive territory.

The broader Topix gained 1.3 percent to 1,480.48 and the JPX-Nikkei Index 400 added 1.3 percent to 13,436.66.