Nikkei Closes 23% Higher in 2012, Best Gain Since 2005

Nigel Thomas
28 Dec, 2012
New York City

The Nikkei index surged 23% in 2012 and its first gain in three years and best annual gain since 2005. The yen declined 12% against the dollar on the hopes that the recently elected government will conduct aggressive stimulus policies and demand Bank of Japan to set 2% inflation target.

[R]7:00 PM Tokyo – The Nikkei index surged 23% in 2012 and its first gain in three years and best annual gain since 2005. The yen declined 12% against the dollar on the hopes that the recently elected government will conduct aggressive stimulus policies and demand Bank of Japan to set 2% inflation target.[/R]

Stocks in Tokyo extended gains to a 21-month high on rising expectations from the newly elected government.

Persistent demand from foreign investors has driven the Nikkei 20% higher in the last six weeks as the yen fell and extended loss of 12% in the year against the dollar.

Foreign investors have stayed away from Japanese stocks in the last two years after the yen strengthened more than 30% between 2008 and 2011.

Foreign investors added net positions in Japanese stocks by 764.9 billion yen in the week to December 15, the largest net addition since March 2011, according to the data release by the Ministry of Finance.

Market expectations remain high that Bank of Japan will increase its inflation target to 2% from 1%. However, with high government debt and weak exports and weak aggregate domestic demand, lifting inflation through higher liquidity in financial system is unlikely.

The Nikkei 225 Stock Average jumped 72.20 or 0.7% to 10,395.18 and the broader Topix Index increased 5.71 to 859.80. For the week, the Nikkei surged 6.8%.

The Nikkei index gained 23% in 2012, first annual gain in three years after the index lost 17% in 2011 and fell 3% in 2010.

But the Nikkei index is still 40% below the level it traded in 2006.

The yen edged lower to 86.25 against one dollar, near the 27-month low in 2011.

Stocks in Review

Toshiba Corp surged 5% on media reports that the company is in talks with at least three companies to sell a stake in its nuclear power unit Westinghouse.

Kansai Electric Power dropped 45 yen or 4.8% to 907 yen and Tokyo Electric Power Co plunged 14 yen or 6.4% to 206 yen.

Toyota Motor Corp. climbed 75 yen to 4,005 yen and Honda Motor Co. jumped 35 yen to 3,145 yen and Nissan Motor Co Ltd increased 13 yen to 811 yen. Mazda Motor Corp soared 8 yen or 4.8% 174 yen.

Nippon Steel up 1 yen to 210 yen and JFE Holdings Inc added 2 yen to 1,602 yen.

Nippon Electric Glass Co dropped 4% after the glass maker lowered its earnings outlook for the nine month period to December on weaker prices for flat panel display glass.

Shimano Inc dropped 70 yen to 5,520 yen.

Sony Corp gained 16 yen to 958, Canon Inc jumped 70 yen to 3,340 yen and Nikon advanced 57 yen to 2,526 yen.

Nintendo Co. Ltd jumped 350 yen or 4% to 9,070 yen and Pioneer Corp. lowered 3 yen to 214 yen.

Fanuc Corp. climbed 190 yen to 15,920 yen and Komatsu Ltd advanced 45 yen to 2,184 yen. Hitachi Construction Machinery Co increased 15 yen to 1,792 yen.

FamilyMart Co Ltd, the convenience chain operator slumped 10 yen to 3,555 yen and Lawson closed unchanged at 5,870 yen. Ito En Ltd gained 4 yen to 1,590 yen.

Seven & I Holdings Co jumped 21 yen to 2,437 yen. Fast Retailing Co. climbed 570 yen to 21,840 yen and J. Front Retailing Co. Ltd added 2 yen to 477 yen.

Mitsubishi UFJ Financial Group gained 10 yen to 461 yen and Sumitomo Mitsui Financial Group climbed 35 yen to 3,115 yen. Nomura Holdings, Inc increased 12 yen to 503 yen.

Mitsui O.S.K. Lines, Ltd lowered 2 yen to 254 yen and Nippon Yusen K.K. up 1 yen to 201 yen.