The Nikkei stock index jumped 1.13 percent Thursday, breaching the psychologically important 16,000 threshold for the first time in eight months, as the yen's retreat versus the U.S. dollar after the U.S. Federal Reserve's policy- setting meeting, offset disappointing trade data.
The Nikkei 225 index added 178.90 points to close the day at 16, 067.57, marking its best finish since Jan. 8, while the broader Topix index of all First Section issues on the Tokyo Stock Exchange gained 12.95 points, or 0.99 percent, to close at 1,317. 91.
Brokers here said the market got off to a bright start following a firm lead from Wall Street after the U.S. Federal Reserve said on Wednesday it would keep its interest rates near zero for a "considerable time" although suggested that it could raise borrowing costs faster than previously expected when it rate hikes kick off.
The Fed also confirmed that its massive bond-buying program will come to a close next month.
The news was enough for the market to shrug off disappointing trade data from the finance ministry showing Japan had logged a deficit for the 26th straight month, on rising import costs and shaky exports due to waning overseas demand.
The U.S. dollar subsequently surged to a six-year high against the yen at 108.87 per dollar today, a boon for investors who rely on a weak yen to boost their competitiveness and profit margins overseas.
On claims the U.S. central bank was being overly hawkish at the conclusion of its two-day policy meeting, some strategists here said the market here factored it all in favorably.
"The stock market doesn't think the Fed is being hawkish, while the currency market thinks rates are going to rise at a fast pace, which led to a stronger dollar. The difference in views between the markets is very big. For Japan, the market is favorably pricing in the weaker yen," said Ayako Sera, a market strategist at Sumitomo Mitsui Trust Bank Ltd.
Some analysts' views were mixed saying the yen's drop was surprising, but favorable to the market, but suggested that even if the yen were to continue to drop, this wouldn't necessarily lead to an uptick in stock prices, thus limiting the market's upside.
But other strategists were more optimistic, with Takuya Takahashi, a senior strategist at Daiwa Securities Co., stating, " Today's 16,000 is just a transition point. Investor expectations of improving business performance by Japanese companies on the back of the weaker yen are likely to push the Nikkei higher."
Trade cooled in the afternoon as investors eyed the upcoming Scottish referendum vote on Independence, but exporters like Toyota found traction on the yen's slide, accelerating 2.2 percent to 6,445 yen, while smaller rival Honda Motor Co., added 2.1 percent to 3,712.
Among other export-related issues, Yaskawa Electric jumped 4.1 percent to 1,496 yen, while game and console maker Nintendo Co. rose 1.5 percent to close the day at 12,180 yen.
But consumer electronics giant Sony tumbled 8.6 percent to 1, 940 yen, marking its biggest drop since November, following the maker of the ubiquitous PlayStation 4 game console saying it projects a loss of 230 billion yen for the year compared with an earlier forecast for a far narrower 50 billion yen loss.
The struggling electronics giant also said it now expects an operating loss of 40 billion yen instead of a 140 billion yen profit initially forecast in July, weighed down by a massive 180 billion yen (around 1.7 billion U.S. dollars) impairment charge for its struggling smartphone division.
For Sony, who logged a group net loss of 128.40 billion yen in the previous year, the latest group net loss marks the sixth business year of red ink in the past seven years, as its Chief Executive Operator, Kazuo Hirai, grapples to turn the tide on the company's ailing smartphone business.
In July Sony slashed its profit outlook for its smartphone business to zero, but maintained its full-year forecast. In the same month Sony also cut its full-year sales forecast for its smartphones to 43 million from 50 million.
But industrial farming equipment maker Kubota was a notable bright spot on the market, rising 2 percent to 1,642 yen, after Credit Suisse raised its rating on the firm's stock to "outperform " from "neutral" and lifted its target price for the shares from 1, 500 yen to 2,000 yen.
Trading volume on Thursday climbed to 2.25 billion shares on the Tokyo Exchange's First Section, up from Wednesday's volume of 1.89 billion shares, with advancing issues outnumbering declining ones by 1,290 to 423.