Japan's Nikkei 225 Closes at Highest Since May 2000

(Bloomberg) — Japan stocks rose, with the Nikkei 225 Stock Average heading for the highest close in 15 years, as the biggest banks jumped and Trend Micro Inc. and Sony Corp. gained.

Mitsubishi UFJ Financial Group Inc., Japan’s largest lender, climbed 3.1 percent to be the biggest support to the Topix Index as banks led gains among industry groups. Anti-virus software maker Trend Micro added 6.5 percent, the strongest support to the Nikkei 225, after projecting profit above analyst estimates. Sony jumped 2.3 percent after forecasting a surge in operating earnings.

The Nikkei 225 gained 0.4 percent to 18,272.50 as of 1:06 p.m. in Tokyo, on course for the highest closing level since May 2000. The Topix added 0.7 percent to 1,493.28 after it closed yesterday at the strongest since December 2007. Seven stocks rose for every three that fell on the gauge.

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“We’re seeing a massive catch-up rally by the megabanks this month, which is powering the Nikkei 225 to a 15-year high,” said David Welch, head of equity sales trading at Reorient Group in Hong Kong. “Sony has been the return-on-equity darling for investors, and after the recent headlines around Fanuc, investors are searching for the next big ROE opportunity and have locked in on the banks as a real opportunity.”

The Topix Banks Index gained 2.6 percent, bringing this year’s advance to 11 percent. The industry group dropped 3.9 percent last year, when the broader Topix gained 8.1 percent.

Mitsubishi UFJ gained 3.1 percent to 766.9 yen. Sumitomo Mitsui Financial Group Inc. added 2.8 percent to 4,693 yen, while Mizuho Financial Group Inc. climbed 3.1 percent to 217.1 yen. All three lenders, Japan’s so-called megabanks, were the biggest supports on the Topix.

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Key Drivers

“Shares that had been falling behind will be the drivers today,” Mitsushige Akino, an executive officer at Ichiyoshi Asset Management Co. in Tokyo, said by phone. “Large-cap stocks will have a hard time rising as the yen isn’t that weak, but it’s likely that stocks that have been falling behind like banks and real-estate shares will continue to be in focus.”

Data showed Japan’s export growth accelerated in January to the fastest pace in more than a year. Overseas shipments rose 17 percent from a year earlier, the finance ministry said Thursday in Tokyo, compared with the median estimate for a 13.5 percent gain in a Bloomberg News survey. Imports fell, narrowing last January’s record deficit.

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Trend Micro gained 6.5 percent to 3,620 yen, the second-biggest supporting stock on the Nikkei 225. The company forecast net income of 22.6 billion yen for the fiscal year ending Dec. 31, beating analyst estimates for 21.7 billion yen in profit.

Sony increased 2.3 percent to 3,246.5 yen. The company forecast operating profit will reach 500 billion yen ($ 4.2 billion) in the year ending March 2018, the highest since 1998. The company also said Wednesday that it will position return-on-equity as a primary key-performance indicator.

Fed Minutes

The yen added 0.2 percent to 118.61 following Wednesday’s 0.4 percent gain after minutes from the Federal Reserve’s latest meeting showed some policy makers argued for keeping rates low for longer amid risks facing the U.S. economy.

The short-term relationship between moves in the Nikkei 225 and the yen flipped today, showing that stocks have been gaining as the currency strengthened, according to 30-day correlation data tracked by Bloomberg. Usually stocks fall when the yen gains and vice versa.

Boost For Stocks

The Federal Open Market Committee, while considering risks to be “nearly balanced,” pointed to a strengthening dollar, international flashpoints from Greece to Ukraine, and slow wage growth as weakening the case for the first rate rise since 2006, according to a record of the Jan. 27-28 meeting.

“If the Fed delays rate hikes beyond September while the U.S. economy isn’t doing badly, it’ll be a boost for stock markets around the world,” Akino said. “The general consensus that the rate hikes will be between June and September hasn’t changed.”

Futures on the Standard & Poor’s 500 Index slipped 0.1 percent after the underlying gauge closed little changed on Wednesday in New York as speculation the Fed will keep rates lower for longer offset a drop in energy shares.

European stocks rose to a seven-year high amid investor speculation that Greece will reach a compromise on its bailout terms with euro-area creditors. The Stoxx Europe 600 Index added 0.9 percent.

To contact the reporters on this story: Anna Kitanaka in Tokyo at akitanaka@bloomberg.net; Yuko Takeo in Tokyo at ytakeo2@bloomberg.net

To contact the editors responsible for this story: Sarah McDonald at smcdonald23@bloomberg.net John McCluskey, Tom Redmond

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