Tokyo investors look to upper house election

This week, Tokyo investors will focus on events leading to the July 21 upper house election following the recent rallies on the nation's premier bourse, analysts say.

The Tokyo Stock Exchange has seen large moves over recent weeks, with the benchmark Nikkei 225 index at one stage down 20% from its five-year high in May.

But the Nikkei was up 4.62%, or 632.65 points, at 14,309.97 in the week to July 5, on top of a 3.38% increase the previous week.

The broader Topix index of all first section shares gained 4.83%, or 54.74 points, to 1,188.58, over the past week.

"The upper house election is the key factor that will affect trading trends," said Kenzaburo Suwa, strategist with Okasan Securities.

Campaigning began last Thursday in an election expected to strengthen Prime Minister Shinzo Abe's control over parliament, ushering in the stability he needs to fix Japan's floundering economy.

Voters nationwide will elect half of the members of the 242-seat house.

"If Abe's coalition wins significantly, the government is likely to take action swiftly," which may lead to further gains in Japanese shares, Okasan's Suwa said.

On Friday, Tokyo stocks jumped 2.08%, following a rally on European markets after the eurozone and British central banks signalled their easy-money policies will remain in place for some time.

With the U.S. market closed on July 4 for the Independence Day public holiday, Asia took its lead from Europe, where stocks jumped after the European Central Bank indicated that rates will remain at low levels for the foreseeable future.

ECB chief Mario Draghi said his bank's decision-making governing council "expects the key ECB interest rates to remain at present or lower levels for an extended period of time".

The Bank of England also held its main interest rate steady and stuck to its stimulus plans at the first meeting headed by its new governor, Canadian Mark Carney.

The yen's slide against the dollar also helped lift the Tokyo bourse.

The dollar stood at 100.35 yen, compared with 99.71 yen in London Thursday, while the euro bought $1.2892 and 129.38 yen, off from $1.2922 and 129.62 yen in London.

Tokyo trading remained thin on Friday, ahead of the release of the monthly U.S. labor report.

© (C) 2013 AFP