The Nikkei 225 stock average soared close to its year-to-date closing high Monday thanks to the yen’s weakness and Wall Street’s continued strength.
The Nikkei jumped 237.41 points, or 1.54 percent, to close at 15,619.13, the highest close since May 22 when the gauge stood at 15,627.26.
The Topix rose 11.04 points, or 0.88 percent, to end at 1,259.61.
The market kicked off the week on a strong note, tracking a rise in New York stocks over the weekend. The Dow Jones industrial average hit a fresh record high Friday.
The Nikkei extended its gains on the back of the yen’s weakness against other major currencies to end at the day’s high. The dollar strengthened to pass ¥101.50.
The yen’s drop against the dollar and the euro fueled investor expectations for upward revisions in full-year earnings forecasts at Japanese exporters, brokers said.
Improved earnings will make Japanese stocks look more attractive than U.S. stocks because their overall price-earnings ratio will fall, an official at a bank-affiliated brokerage said.
The strength of overseas equity markets are also underpinning the Tokyo market, the official said.
The current development is “the best scenario for Japanese stocks,” said Yoshihiko Tabei, chief analyst at Kazaka Securities Co., citing a weaker yen resulting from interest rate differences between Japan and the United States.
But he warned that the recent sharp rise in the Nikkei has resulted mostly from futures-led buying in heavily weighted components such as SoftBank and Fast Retailing and can’t be explained by any fundamental factors.
“The gauge is susceptible to any bad news, although it is unlikely to drop sharply,” he said.
Rising issues outnumbered falling ones 1,209 to 427 on the first section, while 125 issues were unchanged. Volume fell to 2.531 billion shares from 3.038 billion Friday.
The weaker yen boosted exporters, with automakers Toyota, Mazda and Honda posting gains.
Telecommunications firm SoftBank was up for the fourth trading day, rising more than 5 percent, and rival KDDI also gained ground.
Fast Retailing, the operator of the Uniqlo clothing stores, and industrial robot maker Fanuc each jumped more than 2 percent.
Panasonic continued to climb, rewriting its year-to-date high, while peers Hitachi and Toshiba were also buoyant.
By contrast, Sharp wiped out earlier gains and ended easier, and Japan Tobacco shed more than 1.6 percent.
JGBs head lower
Japanese government bonds lost ground Monday, pressured by selling amid rising stock prices.
The lead December futures contract on 10-year JGBs ended down 0.06 point from Friday at 144.71. Turnover fell to 18,343 contracts from Friday’s 28,791.
In late interdealer trading in cash JGBs, the yield on the latest 331st 10-year issue with a 0.6 percent coupon stood at 0.640 percent, up from 0.625 percent late Friday.
JGBs kicked off the week with gains after a rise in U.S. Treasury securities Friday. After the initial buying ran its course, however, JGBs’ topside was capped due chiefly to higher stock prices on the back of the yen’s weakness.