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Trusty ‘tankan’ coaxes limp Nikkei back to life

JIJI

The benchmark Nikkei bounced back Tuesday, bolstered by the yen’s weakening and an improvement in domestic business confidence.

The Nikkei 225 closed up 28.92 points, or 0.20 percent, at 14,484.72. The Topix index edged down 0.66 point, or 0.06 percent, to end at 1,193.44.

The Tokyo market got off to a strong start after the yen’s fall and a better-than-expected “tankan” quarterly business sentiment survey released by the Bank of Japan just before the opening bell. The market accelerated its upswing in the late morning and the Nikkei briefly rose more than 180 points.

The key index, however, erased most of the gains in early afternoon trading after a U.S. government closure became a reality.

Still, the market soon recovered after Prime Minister Shinzo Abe made it clear that the government will raise the consumption tax to 8 percent from 5 percent next April.

In the tankan, the diffusion index for large manufacturers’ current business condition rose to plus 12 from plus 4 in the previous survey, hitting the highest level since December 2007. The survey also showed that large manufacturers’ assumed dollar exchange rate for the current business year to March stood at ¥94.45 on average, raising hopes that many of them could revise up their full-year earnings projections.

“The market had already factored in the sales tax hike next year but Abe’s final decision reassured investors,” said Takuya Takahashi at Daiwa Securities Co.

Market players were keen to see the content of an economic stimulus package to be outlined by Abe later Tuesday to prevent the economy from stalling after the tax hike.

Losers outnumbered advancers 964 to 658 in the first section, while volume rose to 2.794 billion shares.

Solid auction buoys JGBs

Japanese government bonds rose Tuesday, buoyed by buying that emerged after the day’s auction of new 10-year JGBs and announcement of a consumption tax increase.

The lead December futures contract on 10-year JGBs added 0.11 point to end at 144.23. Volume increased to 28,957 contracts from 18,042.

In late interdealer trading in cash JGBs, the yield on the latest 330th 10-year issue with a 0.8 percent coupon stood at 0.660 percent, down from 0.680 percent late Monday.