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Nikkei rallies on hopes for stimulus package

JIJI

Expectations for upcoming economic stimulus measures pushed the Nikkei 225 average Thursday to its highest closing level in more than two months.

The Nikkei shot up 178.59 points, or 1.22 percent, to close at 14,799.12, its best finish since July 18. It snapped a three-session losing streak that included a loss of 112.08 points Wednesday.

The Topix ended 9.34 points higher at 1,220.49, the best since July 23.

Selling outpaced buying in early trading as stocks went ex-dividend after trading for settlements in the April-September fiscal first half came to a close Wednesday. The ex-dividend impact on the Nikkei average was some 80 points, brokers said.

Stock prices were also dampened after the Dow Jones industrial average extended its losing streak to a fifth session overnight amid heightened worries about a U.S. government default.

The Nikkei accelerated its downswing to briefly plunge more than 200 points in mid-morning trading due to large-lot futures-led selling. But it gradually cut its losses and closed the morning session moderately higher, thanks to buybacks on the back of the yen’s easing, brokers said.

In the afternoon, the key index extended gains due to buying fueled by a media report that the government’s economic stimulus package may include plans to start considering as soon as possible a cut in the effective corporate tax rate.

The package will be announced in line with Prime Minister Shinzo Abe’s expected decision Tuesday on whether to raise the 5 percent consumption tax to 8 percent in April as planned.

“The news on a corporate tax cut served as a strong incentive for investors who wanted to buy back, although the story was not fresh news for them,” said Kenichi Hirano, adviser and market analyst at Tachibana Securities Co.

Winners swamped losers 1,043 to 546 on the first section, while 104 issues were unchanged.

JGB futures end lower

Japanese government bond futures shed early gains to end lower Thursday, weighed down by caution about the market overheating.

The lead December contract on 10-year JGBs closed down 0.13 point from Wednesday at 144.02. Volume grew to 22,607 contracts from 22,051.

In late interdealer trading in cash JGBs, the yield on the latest 330th 10-year issue with a 0.8 percent coupon stood at 0.690 percent, up from 0.670 percent late Wednesday.