Nikkei rises as BOJ move underscores optimism

Tokyo, March 10: The Nikkei reversed early losses to rise 1.19 percent on Friday as retailers such as Mitsukoshi Ltd. gained after the Bank of Japan's exit from its ultra-easy credit policy underscored optimism on the economy.

Investors were also relieved the BOJ will keep short-term interest rates around zero for now, and also welcomed its inflation reference rate of 0-2 percent as making monetary policy intentions clearer to markets.

''The BOJ's move is solid proof that the economy is on a strong footing,'' said Teruhisa Ishikawa, a manager in the investment information department of Mizuho Investors Securities.

''Consumer spending remains upbeat, reflected in what looks like a boom of modernisations at several department stores,'' he said.

The Nikkei was up 190.78 points at 16,227.69 as of 0100 GMT after opening slightly lower. The broader TOPIX index was up 1.08 percent at 1,658.79.

Major department store operator Mitsukoshi rose 6.4 percent to 668 yen and rival Isetan Co. Ltd. rose 2 percent to 2,260 yen.

Aeon Co. Ltd. gained 5.8 percent to 2,930 yen after business daily Nihon Keizai reported on Friday that Asia's top retailer by sales is to apply for a banking licence, aiming to enter the banking business in 2007 to broaden its earnings base.

There are strong expectations that corporate and consumer spending will drive the economy forward, and the market is seen taking in stride an expected weak reading in machinery orders data for January, due at 2 p.m. (0500 GMT).

A Reuters poll of economists produced a medium forecast of a 5.4 percent decline for January core machinery orders from the previous month, after a 6.8 percent rise in December.

Core machinery orders, a highly volatile figure regarded as a leading gauge of capital spending, have been robust as companies beef up spending.

Electronics parts maker Kyocera Corp. was among decliners after the U.S. tech-laden Nasdaq Composite Index registered its sixth straight day of losses.

Kyocera lost 0.7 percent to 9,880 yen.

Pioneer Corp. sagged 0.7 percent to 1,925 yen even after it said on Thursday it will likely post a smaller loss than previously expected for the business year to March 31, thanks to the yen's weakness and brisk sales of car navigation systems.

Reuters