Nikkei hits 7-week closing high as yen helps, BOJ eyed

By Aiko Hayashi

TOKYO (Reuters) - Japan's Nikkei average hit its highest close in seven weeks on Friday, with exporters helped by speculation that the yen may weaken if the Bank of Japan takes additional steps to ease monetary policy next week.

Hitachi (6501.T: Quote, Profile, Research) rose nearly 2 percent after its incoming president said he had no plans to carry out additional capital raising, and that the electronics conglomerate must return to profit at any cost in the year starting in April.

Sources have told Reuters that Japan's central bank is leaning toward easing monetary policy again at its two-day policy review that ends on Wednesday.

"The risk of a strong yen appears to be receding as the Bank of Japan is expected to move toward more monetary easing, increasing demand for shares of exporters," said Kenichi Hirano, operating officer at Tachibana Securities.

"The market has a positive bias on improving prospects for the global economy, though further gains in the market will still be gradual going forward."

Some said the impact of the BOJ's potential move could be limited as investors will also be watching the U.S. Federal Reserve's policy review meeting and the meeting of EU finance ministers to discuss Greece's financial problems.

"Even if the BOJ decides to expand its easing policy next week, if the Fed decides to maintain its stance to keep easy policy for a while, that would also impact the dollar/yen," said Akio Yoshino, chief economist at Societe Generale Asset Management.

"So I would be cautious about stock gains that are driven by currency moves in the latter part of next week."

The benchmark Nikkei (.N225: Quote, Profile, Research) rose 0.8 percent to 10,751.26, its highest finish since January 21, while the broader Topix (.TOPX: Quote, Profile, Research) added 0.6 percent to 936.38.

On the week, the Nikkei gained 3.7 percent, its biggest weekly rise in more than 3 months.

Nikkei futures and options contracts expiring in March likely settled at 10,808.73, Tokyo market participants said, citing estimates by local brokerages.

The settlement boosted trading volume, with 2.7 billion shares changing hands on the Tokyo exchange's first section, above last year's daily average of 2.3 billion. Advancing stocks outnumbered declining ones, 992 to 502.

The dollar gained 0.2 percent to 90.64 yen. Investors welcome a weaker yen, which boosts exporters' profits when they are repatriated.

AUTOMAKERS GAIN

Among exporters, shares of Honda Motor (7267.T: Quote, Profile, Research) gained 0.9 percent to 3,300 yen, Nikon Corp (7731.T: Quote, Profile, Research) advanced 2.4 percent to 2,117 yen and silicon wafer maker Shin-Etsu Chemical (4063.T: Quote, Profile, Research) climbed 2.2 percent to 5,210 yen. Hitachi rose 1.9 percent to 326 yen.

Fuji Heavy Industries Ltd (7270.T: Quote, Profile, Research), the maker of Subaru cars, jumped 4.1 percent to 459 yen after Mitsubishi UFJ Securities initiated coverage with the highest "1" rating and a target price of 500 yen.

Mochimaru also gave a "1" rating to Nissan Motor Co (7201.T: Quote, Profile, Research), which rose 2.4 percent to 764 yen.

Biotech firm Takara Bio (4974.T: Quote, Profile, Research) shot up 5.3 percent to 203,500 yen after it signed a collaborative research agreement with the University of Pennsylvania to support an HIV gene therapy clinical trial in the United States.

Hitachi Zosen (7004.T: Quote, Profile, Research), a heavy machinery and engineering firm, rose 3 percent to 139 yen, extending gains after rising 6.3 percent on Thursday, when the company raised its profit forecast and said it would resume dividend payments for the first time in about 12 years.

But some exporters lost ground after rallying recently, weighing on the overall market, with Sony Corp (6758.T: Quote, Profile, Research) shedding 1.7 percent to 3,380 yen.

(Editing by Edwina Gibbs)