Nikkei set for highest close in 3 weeks, Canon up

TOKYO, July 31 (Reuters) The Nikkei was on track to book its highest close in three weeks on Monday, rising 0.78 percent as Canon Inc. continued to gain after posting strong quarterly results.

Shares of Toyota Motor Corp. and other exporters were boosted after U.S. economic data eased concerns about further rate increases in the key U.S. market.

Stronger-than-expected quarterly earnings were helping to boost the Tokyo market, said Hiroyuki Fukunaga, chief strategist at the research division of Rakuten Securities.

''While the market had been expecting earnings to be somewhat poor, companies have been reporting fairly good results. With such decent numbers, it is now possible to have further expectations (for earnings) ahead,'' he said.

The market was also helped after U.S. gross domestic product data showed the world's largest economy slowed more than expected in the April-June quarter, easing concerns about further rate hikes in a key market for Japanese goods.

''The possibility of further rate increases has retreated somewhat,'' Fukunaga said.

Higher U.S. rates are seen as a negative for Japan's exporters, as they eat into consumer spending.

The Nikkei was 120.35 points higher at 15,463.22, as of 0457 GMT, on track for its highest close since July 11.

The TOPIX index was up 0.93 percent at 1,573.87.

Investors were also awaiting earnings results from Toshiba Corp., Hitachi Ltd. and Elpida Memory Inc., among others.

Canon, the world's largest digital camera maker, gained 1.1 percent to 5,520 yen. It has now gained some 2.6 percent since posting stronger-than-expected quarterly results on Thursday.

Toyota, the world's second-biggest auto maker, was up 1.2 percent at 6,090 yen. Its quarterly earnings are due on Friday.

Nippon Electric Glass Co. Ltd. climbed 12.4 percent to 2,580 yen after it posted on Friday strong first-quarter results and raised its half-year net profit estimate by 7 percent, due to higher demand for flat-panel display glass.

Shares of Nippon Steel Corp. turned negative in afternoon trade following its quarterly results.

Shares of Japan's top steel maker were down 0.9 percent at 449 yen after it said quarterly profit fell 19.6 percent from a year earlier, and it kept its full-year forecast for a 16 percent decline.

REUTERS AD HS1141