Nikkei posts biggest day in a month on Toyota pay rise hopes, futures-related buying

* Toyota’s pay increase expectations lift mood – analysts * Foreign investors chase futures market higher – analysts By Ayai Tomisawa TOKYO, March 12 (Reuters) – Japan’s Nikkei share average posted its biggest daily gain in a month on Thursday as investors chased the market higher before the futures settlement, while hopes that Toyota Motor Corp may increase pay also lifted sentiment.

The Nikkei ended 1.4 percent higher at 18,991.11, a fresh 15-year closing high. In early afternoon trade, it touched as high as 19,008.13.

Index-heavy stocks led the gains, with Fast Retailing Co rising 1.3 percent and Fanuc Corp adding 2.3 percent. The two companies together contributed a hefty 44.5 points to the Nikkei.

Media reports saying that Toyota is ready to agree to its most generous pay increase ever lifted investors’ risk appetite, analysts said. Wage increases are a vital component in the government’s strategy to spur more consumer spending and help pull the economy out of decades of deflation.

“If a big company like Toyota decides to increase pay, other automakers and more companies may follow suit,” said Fujio Ando, senior managing director at Chibagin Securities. “Given that there is no tax hike this year, it should help consumption rise.” The Toyota Motor Workers’ Union has sought a 6,000 yen hike for 2015, and the Nikkei business daily reported that Toyota is leaning toward a 3,700 yen step up in monthly base pay on top of the automatic increases in compensation.

Toyota shares rose 1.2 percent.

Traders were also positioning for Friday’s settlement for Nikkei futures and options contracts expiring in March, analysts said.

The closely watched settlement price, known in Japan as the special quotation, or “SQ”, is calculated from the opening prices of the 225 shares in the Nikkei average on the second Friday of the month.

“Foreign derivatives investors are seen chasing the market higher,” said Norihiro Fujito, senior investment strategist at Mitsubishi UFJ Morgan Stanley Securities.

“Those who have long positions in the Nikkei futures are playing the ‘SQ game’. They hope the futures to settle at a higher price.” Analysts added that receding geopolitical concerns also lifted investors’ risk appetite.

Overnight, European shares rebounded, while the International Monetary Fund agreed to pump $ 10 billion into Ukraine’s troubled economy over the next year.

Thirty-one of the Topix’s 33 subsectors were in positive territory.

The broader Topix gained 1.4 percent to 1,546.63 and the JPX-Nikkei Index 400 added 1.4 percent to 14,059.84.

(Editing by Kim Coghill)

Nikkei Futures

nikkeifutures.org@imediaone.com

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