The Nikkei stock index climbed 1.14 percent Thursday as the yen's retreat against the U.S. dollar motivated investors to chase riskier assets higher and the government's likely delay of a second consumption tax hike continue to invigorate the market.
The Nikkei 225 index gained 195.74 points to close the day at 17,392.79, while the broader Topix index of all first-section issues climbed 0.90 percent, or 12.46 points, to finish at 1,389. 51.
Despite a sluggish start, the market gained momentum as the significance of the latest core machinery orders data sank in Thursday.
According to the Cabinet Office, the nation's core private- sector machinery orders increased a seasonally-adjusted 2.9 percent in September from a month earlier, totaling 831.6 billion yen.
Local analysts said this was a welcome shot in the arm for the government and the central bank, who have been grappling to hit a lofty inflation target of two percent in two years, with the latter expanding its already huge asset purchasing program recently to jolt the flagging economy back into action and ensure the yen stays ultra-competitive to benefit the nation's mainstay exporters.
The figures, analysts said, showed that capital expenditure is showing an uptick and the monthly data set is closely watched by the government and the central bank as its regarded as a leading indicator of business investment, the kind of injection of capital the nation desperately needs to permanently reverse deflation.
The Cabinet Office on Thursday maintained its assessment of the orders from a month earlier, reiterating that orders "have shown signs of a gradual pickup."
Along with increasing hopes for the government to delay a planned consumption tax hike and for Prime Minister Shinzo Abe to dissolve the lower house of parliament and call an early election, with his decision likely to be made following key July-September GDP figures due out next Monday, analysts said the move was seeing increasing support from market players who feel the economy here is not ready for another tax hike next year.
The initial sales tax hike from five to eight percent in April this year battered consumption, corporate investment and saw factory output and exports slump.
Economists here said a delay in the second hike from eight to 10 percent from next November for a year-and-a-half, as the government has intimated, will potentially allow enough time to for it to craft the requisite fiscal policies to safeguard against the nation's economic wheels falling off again.
"The market has started pricing in the election," said Masaaki Yamaguchi, equity market strategist at Nomura Holdings Inc. "The stock market is definitely against the tax hike and foreign investors are favoring the delay as well."
This sentiment was echoed by Hiroichi Nishi, assistant general manager of equity research at SMBC Nikko Securities Inc., who said, "Market players have intensified their views that a postponement would make Japan's economic condition better."
The consensus among local brokers was that a delay in the tax hike would mean that more stimulus measures would be unrolled by the government to support the hike and that this was always a boon for the market.
In currency markets on Thursday, the U.S. dollar was fetching 115.69 yen, compared to 115.52 yen logged in New York, but despite the weaker yen which usually elevates exporter issues who see their profits increased when repatriated from overseas, not all exporters advanced.
Top automaker Toyota Motor Corp. accelerated 1.3 percent to 6, 930 yen, while Nissan advanced 1.1 percent to 1,072 yen. Yamaha Motor jumped four percent to 2,410 yen, and Honda Motor Co. gained one percent to 3,626 yen, despite abounding a global recall of 17, 000 of its vehicles in the latest Takata air bag debacle.
Takata, for its part, facing criminal claims for accidents and four deaths in the U.S. related to its faulty airbags and for allegations its concealed safety tests from authorities, climbed 3. 3 percent to 1,231 yen, after the firm rejected claims it hid tests on its air bags. The faulty air bags have led to more than six million vehicles being recalled.
News also emerged on Thursday of a fatality related to one of its airbags in Malaysia, causing the stock to pare more than nine percent of its gains.
Consumer electronics makers closed mixed, with Panasonic adding 1.09 percent to 1,436.5 yen, but larger counterpart Sony dropped 0. 65 percent to close the day at 2,350 yen.
Trading volume on Thursday fell to 2.46 billion shares on the Tokyo Exchange's First Section, down from Wednesday's volume of 3. 12 billion shares, with advancing issues declining ones by 1,297 to 433.