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Low Yen keeps Nikkei moving forward

Friday, February 01 07:45:27

Japan's Nikkei average marked its 12th straight week of gains, its longest winning streak in 54 years, as investors bought companies that sparkled during the earnings season and stayed optimistic that a weak yen would boost bottom lines.

The Nikkei, which reached 11,237.84 during today's session, ended 0.5 percent up at a 33 month closing high of 11,191.34. The index gained 2.4 percent this week, giving it the longest run of weekly gains since 1959.

Sharp Corp gained 5.8 percent after media reports said the company would post its first operating profit in five quarters in the three months through December on strong sales of home appliances and mobile phones.

After the bell, Sharp reported it logged an operating profit of 2.6 billion yen ($28.5 million) for the last three months of 2012.

For the overall market, "earnings haven't been great so far, but everyone had very low expectations of the last quarter, partly because the yen only weakened at the very end of it," said Hirokazu Fujiki, manager of investment at Okasan Securities.

"But sentiment is extremely strong at the moment. The Nikkei has broken out of the box market it was stuck in for a lot of January and is on its second wind. I can see that continuing until March, but then people might do a reality check and see if the economy is actually improving," he said.

The Nikkei has rallied 29 percent since mid-November, when Shinzo Abe, then a candidate for leader of the opposition and now prime minister, started calling for aggressive monetary policy and fiscal expansion, an economy policy now known as "Abenomics".

Expectations that Abe could pull Japan out of deflation and reinvigorate its economy have driven the yen down 10 percent against the dollar, boosting exporters. A weaker yen translates to higher revenue when overseas sales are repatriated. On Friday, the yen hit a 32-month low of 92.2 versus the dollar.

Financials and real estate, which could benefit from Abe's reflationary policies, have nearly caught up with rises in exporters.

While the auto sector has gained 47 percent since mid-November, banking has added 40 percent and real estate has advanced 31 percent in the same period.

Nomura Holdings Inc 's 12.8 percent increase in operating profit for the October-December quarter disappointed some investors hoping for larger gains from the Nikkei rally. Nomura shares fell 2.7 percent today. ( C) Reuters