Japan TOPIX at 8-mth closing high, Nikkei +0.9 pct

Tokyo, Jan 15: Japan's TOPIX index rose 1.15 percent to its highest close in eight months on Monday as bank shares rang up gains on an expected interest rate hike this week, while stronger machinery orders than expected lifted Fanuc Ltd and other machinery firms.

Auto shares such as Honda Motor Co. Ltd. extended gains with the yen near 13-month lows against the dollar while Japan Airlines Corp. surged on its plan for bank borrowing to cover the possible redemption of convertible bonds.

Many market participants now expect the Bank of Japan to raise interest rates at its policy-setting meeting on Jan. 17-18, although some politicians have been urging the central bank to keep the overnight call rate target at 0.25 percent.

''If the BOJ moves in January, it's the best thing that could happen to the markets, because then the uncertainty factor is gone,'' said Kirby Daley, a strategist at Fimat.

The TOPIX index of all first-section shares on the Tokyo market rose 19.31 points to 1,704.58, its highest close since May 11 last year. The benchmark Nikkei average gained 0.90 percent or 152.91 points to 17,209.92.

While talk of interest rate hikes moved bank shares, Takashi Miyazaki, general manager in the investment strategy division of Mitsubishi UFJ Asset Management Co. Ltd., said the market focus is already shifting to corporate earnings.

''Considering that the U.S. economy is expanding steadily, we can expect at least profit growth of anywhere between 5 and 9 percent for the next financial year. The Nikkei could advance above the last year's high if better earnings outlooks are confirmed,'' he said.

Trade volume on the first section fell to 1.9 billion shares from 2.1 billion in the previous session. Advancing shares outnumbered decliners by a ratio of nearly seven to one.

BANKS HIGHER

The chance of higher interest rates helping banks' lending business pushed up shares of banking groups, with industry leader Mitsubishi UFJ Financial Group Inc. up 1.3 percent and Mizuho Financial Group Inc. rising 1.4 percent.

Industrial robot maker Fanuc gained 1.5 percent to 11,350 yen and Komatsu Ltd., a maker of construction machinery, rose 1.7 percent to 2,365 yen after data released just before the opening showed core private-sector machinery orders, a gauge of corporate capital spending, rose 3.8 percent in November, above economists' forecasts for a 3.4 percent increase.

The yen traded at around 120.25 yen to the dollar in the afternoon after touching a 13-month low of 120.74 yen on Friday.

Export-oriented companies benefit from a weaker yen because it inflates profits when overseas earnings are brought home.

Toyota Motor Corp. rose 1.5 percent to 7,940 yen and Honda Motor Co. Ltd. added 1.7 percent to 4,690 yen. Honda also got a boost from its plans to build a second Indian plant in the northern state of Rajasthan, with initial annual capacity for 50,000 units, and to make a small car for sale in India.

Japan Airlines, Asia's biggest airline by sales, jumped 5.1 percent to 247 yen after it said on Sunday it planned to ask financial institutions for loans of around 60 billion yen (9.1 million) for the year ending March 31 to cover the possible redemption of convertible bonds.

Reuters