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Nikkei climbs to 2-week high on production outlook, yen's retreat

06-01-2011 08:10 BJT

TOKYO, May 31 (Xinhua) -- Tokyo stocks rose sharply on Tuesday, with the key Nikkei stock index climbing 1.99 percent to a two-week closing high as investor sentiment was lifted by an upbeat outlook on the national industrial output and exporters gained as the yen weakened on a possible downgrade to Japan's credit rating.

Although trading got off to a lackluster start, news before the market opened that Japan's industrial output rose 1.0 percent in April, following a plunge of 15.5 percent the previous month, added incremental support, but it was manufacturers' outlook that significantly buoyed the market mood, analysts said.

The Ministry of Economy, Trade and Industry said that manufacturers surveyed expect factory output to climb 8.0 percent in May and rise 7.7 percent in June as further progress is made with restoration and output levels in the wake of the earthquake and tsunami in March.

"Looking at these outlook figures, we are able to confirm a faster-than-expected recovery in Japan's supply chain," said Toshikazu Horiuchi, a strategist at Cosmo Securities.

"Investors got past the weak data in April and cheered the strong outlook by buying futures," equity strategist at Mizuho Securities Tsuyoshi Segawa said.

Market players added that it was the yen's retreat boosting exporters in the afternoon session that propelled the market's sharp advance in the afternoon session.

A report in the Wall Street Journal on Monday saying that Germany is considering not pushing for a quick rescheduling of Greek bonds to help the debt-plagued country get a new package of aid loans sent the euro higher.

The single-European currency advanced 1.4 percent against the yen to near the 117 yen level and the U.S. dollar climbed 0.8 percent against the yen to the mid-81 yen level, following Moody's Investors Service Inc. saying that Japan's sovereign debt ratings had been put on review for a possible downgrade.

Moody's said Tuesday it is placing Japan's sovereign debt ratings on review for a possible downgrade, due to the indebted government's fiscal problems compounded by the massive restructuring costs from the March 11 earthquake and tsunami.

The rating agency is reviewing Japan's Aa2 local and foreign currency bond ratings stating that there was "heightened concern that faltering economic growth prospects and a weak policy response would make more challenging the government's ability to fashion and achieve a credible deficit reduction target."

The 225-issue Nikkei Stock Average gained 188.76 points from Monday to 9,693.73, while the broader Topix index of all First Section issues on the Tokyo Stock Exchange climbed 14.80 points, or 1.80 percent, to finish at 838.48.

Japanese exporters gained on the yen's retreat and Toyota Motor leapt 2.1 percent to 3,400 yen and Sharp added 2.7 percent to 760 yen.

Electronics maker Kyocera Corp. advanced 1.3 percent to 8,510 yen and consumer electronics giant Sony Corp. rose 1.9 percent to 2,163 yen, as problems connected to cyber attacks on the firm's online gaming networks recede.

Industrial robotics maker Fanuc was also among Tuesday's notable gainers, climbing 1.8 percent to close at 12,490 yen.

But utility firm Tokyo Electric Power Co. (TEPCO), owner and operator of the crippled Fukushima nuclear power plant in northeast Japan, dropped 2.8 percent to 317 yen, following Standard and Poor's lowering its credit rating on the firm to junk status, citing the increased likelihood of the utility's debt holders being forced to waive some of the debt so that TEPCO can make compensation payments to those affected by the ongoing Fukushima nuclear disaster.

Trading volume on Tuesday climbed to 2.29 billion shares on the Tokyo Exchange's First Section, jumping from Monday's volume of 1. 38 billion shares, with advancing issues trumping declining ones by 1,342 to 203.

Editor:Yang Jie |Source: Xinhua

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