Nikkei rises, Honda up ahead of new fiscal year

TOKYO, Mar 27 (Reuters) The Nikkei average rose 0.78 per cent today as companies with strong earnings prospects such as Honda Motor Co Ltd gained on expectations of new cash inflows from domestic institutional investors at the start of the business year from April 1.

A government survey released before the opening showed big Japanese manufacturers were less confident about business conditions in the three months to March.

But the outlook was stronger for the following two quarters, underscoring optimism about results of the Bank of Japan's quarterly tankan corporate sentiment survey due next week.

''We don't have to take deterioration (in the government survey) for the current quarter so seriously,'' said Takashi Ushio, head of investment strategy division at Marusan Securities.

''Looking forward, if the tankan survey produces similarly strong outlooks, that would give a good opportunity to buy shares given an expected improvement in share demand/supply balance at the beginning of the new fiscal year,'' he added.

Monday is the last trading day for stocks whose settlement is due in the current fiscal year, which ends on March 31.

The Nikkei was up 128.36 points at 16,689.23. It earlier rose as high as 16,711.16, approaching the year-to-date intraday high of 16,777.37 marked in February.

The TOPIX index was up 0.17 per cent at 1,692.21.

Honda, Japan's third-biggest auto maker, hit a lifetime high of 7,370 yen before ending the morning session up 1.9 percent at 7,360 yen.

Toyota Motor Corp., the most active issue by value, was up 0.2 percent at 6,360 yen.

Ushio said manufacturers with a global competitive edge, such as auto makers, were in favour due to increasing optimism about the world economy.

Masatoshi Sato, senior strategist at Mizuho Investors Securities, shared the view, and said recent gains in US stocks due mainly to easing concerns about higher interest rates aided shares of Japan's top exporters.

''Anticipation about US monetary policy has stabilised the U.S. markets,'' he said. ''More people now bet on a soft-landing scenario, and that is a plus for export-related stocks here.'' Investors are eager to know how far the US Federal Reserve intends to raise interest rates in one of Japan's largest trading markets. The Federal Open Market Committee (FOMC) policy-setting meeting is due to be held on Monday and Tuesday.

Precision machinery maker Dainippon Screen Manufacturing Co.

Ltd. climbed 7 percent to 1,115 yen after it revised up its earnings forecasts on Friday for the year ending this month.

A rebound in the US Nasdaq index helped some technology stocks such as chip equipment maker Advantest Corp., which was up 1.3 percent at 13,220 yen.

Mitsui Chemicals Inc. fell 2.4 per cent to 882 yen, extending falls into a third session following its downward revision to its earnings forecasts due to higher costs for raw materials such as naphtha.

E*Trade Securities Co Ltd, Japan's top online broker by market share, lost 2.6 per cent to 262,000 yen on the Jasdaq market for start-ups due to concerns about competition with Nomura Holdings Inc., Japan's biggest securities brokerage.

Nomura, which was down 1.2 per cent at 2,540 yen, said on Friday it expects its new online venture Joinvest Securities Co.

to turn a profit by March 2008.

Trade volume was slow with 821.7 million shares changing hands on the Tokyo bourse's first section, compared with last week's morning average of 910 million.

Advancers outnumbered decliners 1,051 to 527.

REUTERS SHB SP0938