Strong Japan output boosts yen, Asian shares

SINGAPORE, Nov 29 (Reuters) The yen jumped against the euro and the dollar on Wednesday and Japanese shares rose as robust industrial output data soothed worries about Japan's economy and bolstered the view interest rates will rise soon.

Japanese government bonds slid on the data, which also helped pull regional share markets higher despite a rise in oil prices above $61 a barrel on forecasts for colder weather in the United States.

''Japan's industrial output data is proving its economy is on track for stronger growth, so the implications for the global economy are positive,'' said Jason Hwang, a strategist at Woori Investment and Securities in South Korea.

Taking its cue from the U.S. currency's weakness versus the yen, the euro extended gains to hit a fresh 20-month high and sterling hit another two-year peak against the dollar.

The Japanese data showed a surprise 1.6 percent rise in industrial production in October from a month earlier, beating expectations for a 0.5 percent fall.

''Up until last month, production data has suggested it was peaking out, but the latest data shows that the underlying trend of strong production remains intact,'' said Takeo Okuhara, a bond strategist at Daiwa Institute of Research. ''The data is very good.'' Tokyo's Nikkei led gains in Asian share markets, rising 1 percent in morning trade and topping 16,000 points for the first time in more than a week.

Among the top gainers, auto parts maker Denso Corp. rose 1.6 percent and metalworking machinery maker Amada Co. gained 4.1 percent.

MSCI's broadest index of Asia shares outside Japan was up 1 percent at 0210 GMT.

Australia's S&P ASX 200, Seoul's benchmark index, Hong Kong's Hang Seng, Taiwan's benchmark index and Singapore's Straits Times all rose between 0.5 and 1 percent.

U.S. stocks edged up on Tuesday, as the Dow Jones industrial average gained 0.1 percent and the Nasdaq Composite Index 0.3 percent.

RATE RISE Most analysts have been expecting the Bank of Japan to raise interest rates to 0.5 percent from 0.25 percent by the end of March, with some seeing a rise in December. The output data underlined expectations for a rise in the next few months.

''It's the type of content that will strengthen expectations for a slightly early rate rise,'' said Mamoru Yamazaki, chief economist for RBS Securities, although he added he was sticking to a forecast for the BOJ to raise rates in January.

The dollar bought around 115.70 yen at 0210 GMT, down from 116.15 yen in late U.S. trading.

Sterling was slightly up on the day around $1.9530 after hitting $1.9545, its highest since December 2004. The euro was down a touch at $1.3195 after marking a 20-month high of $1.3218.

The euro hit another record high against the Japanese currency in early Asian trade, rising to around 153.40 yen, before erasing its gains on the Japan output data to trade around 152.60 yen, down from 153.30 in late U.S. trade.

Benchmark Japanese government bond 10-year futures tumbled 0.49 point to 134.63, while 10-year yields jumped 5 basis points to 1.695 percent.

NYMEX crude for January delivery rose 13 cents to $61.12 a barrel, building on this week's gains after private forecaster AccuWeather said that cold weather would sweep into the U.S.

Northeast by the weekend, ending a recent warm spell in the world's biggest heating oil market.

Rising prices boosted shares in oil company's, with Australia's Woodside Petroleum Ltd. up 1.4 percent and Japan's INPEX Holdings Inc. rising 3.5 percent.

Gold was steady around $639.50 an ounce.

REUTERS AKJ KP0920