The Nikkei average rose for a third straight session on Wednesday, inching towards recent eight-month highs as a mostly upbeat start to the US earnings season lifted expectations for Japanese firms to show further recovery. Target price hikes for Google and earth-moving equipment maker Caterpillar have bolstered hopes that the world's No 1 economy is on a sustainable recovery path and sent US stocks higher, despite weak results from Citigroup.
The Nikkei has climbed 3 percent this year and is up 15 percent since the start of November after many foreign investors changed their stance on laggard Japanese stocks to neutral from underweight. Toray Industries Inc, Japan's largest maker of synthetic fibres, jumped 4.7 percent to 556 yen and Teijin Ltd surged 6.6 percent to 421 yen, becoming the biggest percentage gainer among the Nikkei 225 components.
Brokers said individual investors now stand for some 30 to 40 percent of the market, indicating that the mood remains upbeat. The benchmark Nikkei ended the day up 0.4 percent or 38.12 points at 10,557.10. Resistance now looms at 10,620.57, an eight-month peak marked last week, market players said. If that level is breached, the next target investors are eyeing is 10,638.23, a high hit in May last year.
The broader Topix index rose 0.6 percent to 936.87. With individual investors actively buying, trading volume was firm, with 2.2 billion shares changing hands on the Tokyo Stock Exchange's first section, slightly below last week's average of 2.3 billion.
Non-ferrous metals smelters were also among the Nikkei's top gainers, with the sector index adding 2.5 percent as copper hovered near record highs on Wednesday on a weaker dollar. Sumitomo Metal Mining gained 4.9 percent to 1,456 yen and Dowa Holdings climbed 5.2 percent to 592 yen.
Market participants said foreign buying is set to continue on expectations Japanese companies will show further improvements in their October-December earnings, but also stressed that earnings are still well below levels from before the financial crisis. Market will also look for news about how well-prepared the firms are to sustain an earnings recovery in the long run. Chibagin's Osakabe mentioned cost control, structural changes, exposure to growing Asian markets and foreign currency hedging as key focal points for the market. Advancing issues outpaced declining ones by a ratio of about 2 to 1.
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