Nikkei rises 1.6 pct as exporters gain on weak yen

TOKYO, Aug 31 (Reuters) The Nikkei average rose 1.64 percent on Thursday as exporters including Toshiba Corp. and Canon Inc. gained ground after a fall in the yen spurred optimism about their earnings.

Weaker-than-expected industrial output data, released before the opening, fuelled expectations that the Bank of Japan will only raise interest rates very slowly, extending a fall in the yen against major currencies and also boosting Japanese government bond (JGB) prices.

A weaker yen is a boon for exporting firms, as it boosts revenues when earnings from abroad are brought home.

''The weaker yen is having a big impact,'' said Soichiro Monji, chief strategist of equity management at Daiwa SB Investments.

As of 0445 GMT, the Nikkei was 260.51 points higher at 16,132.53.

It earlier rose as high as 16,207.41, up 2.1 percent from the previous close and its highest intraday since Aug. 23.

The broader TOPIX index was up 1.23 percent at 1,632.50.

Norihiro Fujito, general manager at Mitsubishi UFJ Securities, said a sudden jump in the Nikkei by more than 300 points in early afternoon was driven partly by derivatives players who hurried to lock in profits from long bond futures and at the same time unwind short Nikkei futures.

''It's certainly difficult to explain the mechanism behind this broad-based buying which sent the Nikkei up more than 300 points only with fundamentals,'' he said. ''My understanding is that trading of derivatives played a key role.'' He also said Toshiba and Canon were in favour against the backdrop of a shift of investor focus in the United States to technology bellwethers from overvalued energy stocks.

Shares of Toshiba, the world's fourth-largest microchip maker, hit a five year high of 840 yen before trading up 3.1 percent at 835 yen.

Office equipment maker Canon, which makes some 77 percent of its sales outside Japan, rose 1.9 percent to 5,820 yen.

Canon earlier rose as high as 5,840 yen, a three-month high based on share-split adjusted prices.

Auto makers also drove higher on a weaker yen with Toyota Motor Corp., the world's second-biggest auto maker, rising 1.3 percent to 6,370 yen.

Shares of Rakuten Inc., Japan's biggest Web shopping mall operator, were down 3.9 percent to 51,600 yen on the Jasdaq market for start-ups, having earlier pushed into positive territory.

Weekly magazine Shukan Shincho reported in its Thursday edition that Rakuten's president had been questioned by investigators, and suggested the inquiry revolved around suspicion of breaching insider trading rules related to Rakuten's purchase of shares in TV station Tokyo Broadcasting System Inc.

Rakuten said on Thursday the article was untrue and it planned to take legal action against the magazine.

REUTERS CS BS1125