Nikkei up 0.6 pc on Europe and yen, Seven

Tokyo, July 5: Japan's Nikkei average rose 0.6 per cent on Thursday, ontrack to finish higher for a sixth session as investors picked up SonyCorp. and other exporters following gains in European shares and aslight fall in the yen.

Seven&I Holdings Co. jumped 3.1 per cent after Merrill Lynchraised its rating on the retailer to ''buy'' from ''neutral'', citingexpectations that it will benefit from rising food prices and that itsearnings outlook will become clearer once it announces first-quarterresults after Thursday's close.

The benchmark Nikkei closed the morning up 100.11 points at 18,268.83after flirting with a seven-year intraday high of 18,300.39 hit inFebruary. The broader TOPIX index gained 0.7 percent to 1,794.83.

Market players said the Nikkei was struggling to clear the 18,300 markwith many foreign investors on the sidelines due to the U.S.Independence Day holiday and caution ahead of Japan's upper houseelection on July 29.

''The yen's fall has sparked some buying of export-related shares,particularly those with solid earnings prospects,'' said HiroakiKuramochi, managing director at Bear Stearns.

''But there is caution ahead of the election, and that is holding someinvestors back. People are starting to speculate about the next primeminister.'' Public anger over the government's bungling of pensionrecords and this week's resignation of the defence minister has made itincreasingly likely that Prime Minister Shinzo Abe's ruling camp willlose the election, an outcome that would threaten policy paralysis andput pressure on Abe to resign.

With Wall Street on holiday, investors took their cue from a rise inEuropean stock markets. Investors were also encouraged to buy exportersafter the dollar strengthened slightly to about 122.7 yen compared with122.4 yen earlier this week.

Among blue-chip exporters, consumer electronics giant Sony rose 2.4percent to 6,460 yen while Komatsu Ltd., Japan's largest maker ofconstruction equipment, rallied 2.4 percent to 3,800 yen.

Reuters>