Nikkei ends volatile 2016 to mark highest close in two decades

Tokyo's benchmark stock index ended a volatile 2016 on a down note Friday, but still hit the highest year-end close in two decades on optimism over the incoming US government. President-elect Donald Trump's surprise election victory last month has sparked a rally in global equity markets and pushed the dollar higher on expectations of big government spending and a rise in interest rates.
"Trump was a game changer," said Hisao Matsuura, chief strategist at Nomura Securities. Matsuura said that early this year investors had grown weary of accommodative central bank monetary policies while recognising that their effectiveness was waning. "So the fiscal stimulus from the US, even if it's not happening now, is positive news," he said. "The market is changing from monetary to fiscal policies."
Japan's benchmark Nikkei 225 index rose 0.42 percent in 2016 to close at 19,114.37, marking the fifth consecutive annual increase and highest year-end finish since 1996 when it ended at 19,361.35. On Friday, however, it lost 0.16 percent, or 30.77 points, taking its downward lead from the US overnight. The broader Topix index of all first-section shares was unable to keep pace this year, losing 1.85 percent to 1,518.61, snapping four years of gains. It managed to edge up 0.01 percent, or 0.22 points on Friday.
The Nikkei fell below the psychologically important 15,000 mark in late June after Britain's vote to exit the EU pummelled world markets, while a strong yen hit Japanese exporters. But the index regained vigour since Trump was elected as dealers bet his plans for big spending and tax cuts will fan inflation and force the Federal Reserve to more aggressively hike interest rates -- sending the dollar soaring against the yen.
A weaker yen is generally good for profits for Japanese companies doing business abroad, stoking demand for their shares. Analysts were generally upbeat on the prospects for Japanese equities in 2016. "We expect the Nikkei to go beyond 21,000 points in 2017," said Kazuhiro Takahashi, equity senior strategist at Daiwa Securities. "It could even appreciate to 23,000 points", he added. "That's the optimistic scenario."
Shares in troubled Toshiba jumped Friday following a three-day bloodletting in which investors dumped the stock over expectations of a massive one-time loss. Toshiba rose 9.43 percent to 283.1 yen after losing some 40 percent from Tuesday through to Thursday. The company this week warned of a possible loss of several billion dollars in its US nuclear business but said the exact figure had yet to be determined, which fuelled investor anxiety.
"Some players bought on dips today but it's still uncertain if Toshiba shares will continue to recover next year," said Hikaru Sato, senior technical analyst at the investment strategy section at Daiwa Securities. Auto parts maker Takata surged 21.21 percent to 857 yen, adding to a 16.47 percent jump the day before after news it is close to settling a US criminal probe into an exploding airbag scandal.
Market heavyweight Fast Retailing was down 1.94 percent at 41,830 yen, Sony fell 0.72 percent at 3,275 yen, while Nissan declined 0.42 percent at 1,175.5 yen. In currencies, the dollar bought 116.80 yen in Tokyo, up modestly from 116.63 yen in New York. On Wall Street, the Dow Jones Industrial Average shed 0.1 percent to 19,819.78. The broad-based S&P 500 slipped marginally to 2,249.26, while the tech-rich Nasdaq Composite Index dropped 0.1 percent to 5,432.09.