Wednesday March 21, 4:24 am Eastern Time
Tokyo's Nikkei ends up 7 pct as market cheers BOJ (UPDATE: Recasts, adds details on autos, Aoki)
By Nathan Layne
TOKYO, March 21 (Reuters) - Tokyo stocks leapt more than seven percent on Wednesday, their biggest one-day gain in three years, as investors brushed off a plunge in U.S. stocks amid hopes a dramatic central bank easing will revive the debt-ridden banking sector.
``The rally in the face of weakness overseas is impressive and encouraging. The market is applauding the Bank of Japan for its radical steps and is hoping the economy can begin to rebound off this,'' said Nobuaki Kurisu, chief fund manager at Sumisei Global Management.
The Nikkei average surged 7.49 percent or 912.97 points to 13,103.94, its biggest one-day percentage gain since November 17, 1997, when it jumped 1,201 points or 7.96 percent.
Winners overwhelmed losers 1,370 to 66 on the Tokyo Stock Exchange's first section. Volume was heavy, with 1.06 billion shares changing hands, soaring above Monday's 652.88 million.
It was the big board's most active session since March 9 when a special quotation for futures andoptions contracts boosted turnover to 1.35 billion.
The capital-weighted TOPIX index (^TOPX - news) threw on 6.32 percent or 75.80 points to 1,275.41, the 10th-biggest percentage hike in the index's history, the Tokyo Stock Exchange said.
BOJ, BANKS, BAD LOANS AND BUREAUCRATS
Buoying the market was the Bank of Japan's (BOJ) dramatic change in policy on Monday when it scrapped its interest rate target, aiming instead to pump up the volume of commercial bank account deposits lodged at the central bank -- effectively returning to zero interest rates.
Mizuho Holdings , the world's largest bank by assets, soared 10.05 percent to 690,000 yen, underlining strength in a sector that stands to benefit from the central bank's move to lower borrowing costs.
The central bank's decision was followed by the U.S. Federal Reserve, which cut its key Federal Funds rate by 50 basis points, less than the hoped-for 75. A disappointed Wall Street slid.
Traders said the BOJ has done its part and the burden now lay with Japan's government to clean up a mountain of non-performing loans -- estimated at 40-80 trillion yen by Nomura Research Institute -- crippling the financial system and the world's second-largest economy.
``The BOJ did all they could and we are pleased,'' said Masayoshi Okamoto, a trader at Jujiya Securities. ``The ball is now in the government's court and the market is, unlike before, really expecting a speedy response -- not more rhetoric.''
Hopes were raised, traders said, by Prime Minister Yoshiro Mori's pledge to U.S. President George W. Bush at a summit in Washington on Monday to take effective steps to fix the mess.
Aoki Corp , a mid-sized builder, was the most heavily traded issue on the first section. It rocketed 32.43 percent higher to 49 yen in anticipation of cheaper borrowing rates and a media report its profits will likely firm this year.
SUSTAINABLE RALLY?
Market players were optimistic about further runs higher.
``We saw a lot of short-covering today, but the momentum feels strong and if the U.S. stays at least flat tomorrow, we should see the market advance,'' said Sumisei Global's Kurisu.
Major technology issues firmed despite the tech-heavy Nasdaq's 4.8 percent plunge, with already-firm sentiment boosted by the prospect of a weaker yen boosting exporters profits.
Personal computer and chip maker NEC Corp added 8.71 percent to 1,760 and electronics titan Sony Corp gained 3.75 percent to 8,580.
Industry rival Fujitsu Ltd gained 7.83 percent to 1,570 yen, with traders attributing part of the rise in shares of major exporters to the softer yen and signs it may fall further.
Auto stocks also rode the yen's dip, with Toyota Motor Corp soaring 6.65 percent to 4,650.
Analysts said retail stocks such as Ito-Yokado Co Ltd jumped in anticipation that easier credit could kick-start sluggish consumer spending.
The BOJ pledged to inject ample funds to the money market until the underlying consumer price index has stabilised at zero or above.
Sector leader Ito-Yokado surged 17.86 percent to 6,600 yen, bouncing back from its profit warning-induced slip last month.
Sources said early purchases on dips by postal savings funds in the futures market also helped to lift sentiment, which in turn triggered follow-through buying by other investors.
Monday's upgrade by Lehman Brothers of its investment rating on Japanese equities to ``overweight'' was a boon. That could lure cash from foreign pension funds and institutional investors into Japan amid hopes for more effective policy, players said.
The second-section index firmed 1.16 percent to 1,948.54, while the Nikkei over-the-counter index (^NOTC - news) added 1.45 percent to 1,306.86.
The June Nikkei futures contract <0#JNI:> surged 1,000 points to 13,000.