Exporters drive Nikkei to three-month high

Japan's Nikkei average scaled a new three-month high on Wednesday, boosted by gains in exporters such as Toyota Motor and Canon as the yen weakened following data showing Tokyo posted its first annual trade deficit since 1980. Battered electronics firms such as Sony Corp and Panasonic Corp also regained ground ahead of their earnings reports next week.
Toyota climbed 3 percent and topped the main board as the heaviest-traded stock by turnover, also boosted after the carmaker raised its 2012 domestic sales forecast by 6.5 percent from its previous estimate and 36 percent higher than 2011. Peers Nissan Motor Co, Honda Motor Co and Suzuki Motor Corp gained between 2.5 and 4 percent, while the Topix transport equipment subindex, home to Japan's automakers and parts manufacturers, rose 3.1 percent.
The transport equipment sector is up nearly 12 percent so far this month after shedding more than 21 percent in 2011. According to Thomson Reuters I/B/E/S, the pace of deterioration on the sector's earnings momentum - analysts' upgrades minus downgrades as a percentage of total estimates -moderated to minus 6.2 percent from minus 12.4 percent a month earlier.
The slowing deterioration was in line with that of the broader Topix index. The Topix's earnings momentum was minus 4.8 percent this month versus December's minus 8.1 percent and the US S&P 500's minus 10.7 percent. The Nikkei closed 1.1 percent higher at 8,883.69. The benchmark is up 5.1 percent this month, and if the index were to finish with the current gains, it would be the best January performance since 1998.
The broader Topix gained 1.3 percent to 767.40. Volume on the main board recovered, with 2.2 billion shares changing hands, up from Tuesday's 1.84 billion shares and Monday's 2.01 billion. Sony Corp and Panasonic Corp advanced ahead of their results next week, retreating from recent lows and adding 4.8 and 2.5 percent, respectively.
"People were shorting these stocks (Sony and Panasonic) ahead of earnings next week, but they started buying back their positions after the yen declined slightly," said Seiki Orimi, senior investment strategist at Mitsubishi UFJ Morgan Stanley Securities.
Shippers extended Tuesday's hefty rise, with Mitsui O.S.K. Lines Ltd surging 7.6 percent and Kyoei Tanker Co jumping 30.3 percent. The sector index cruised 6.3 percent higher to become the top sectoral performer on the Topix, recovering some of last year's 47 percent fall. Deutsche Bank said in a note that shipping rates were unlikely to decline substantially despite uncertainty surrounding bookings. Market participants also cited a recovery in freight rates on the export route from the Middle East Gulf to Japan.
Financial markets had shifted their focus to the US Federal Reserve meeting, which ends on Wednesday, from the stalled talks on Greece debt swap between Athens and its private creditors. "The fact that Greek debt negotiations have hit turbulence is nothing new and although market players are viewing this with some caution, investor sentiment is improving and there is a generally optimistic view they will come to an agreement," said Hiroichi Nishi, equity general manager at SMBC Nikko Securities.