By Jake Maxwell Watts
Japanese shares closed at a six-year high Tuesday, propelled steadily upward as investors looked to developed Asia for returns, indicating growing faith in Japan’s reform agenda.
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The Nikkei 225 /zigman2/quotes/210597971/delayed JP:NIK -0.42% was 0.1% higher, a level last reached in December 2007. The market’s year-to-date gains hit 53.8% and making it by far Asia’s top performer. The gains followed another strong performance in U.S. stocks, which advanced for the fourth-straight session, with the Dow Jones Industrial Average /zigman2/quotes/210598065/realtime DJIA +1.85% closing at a record high for the 48th time this year.
“While Japanese retail investors and mutual funds are selling Japanese equities due to the termination of tax incentives for investments at the end of the year, foreign investors are buying as they see Japanese equities as still being relatively cheap compared with U.S. shares,” said Mitsushige Akino, a fund manager at Ichiyoshi Asset Management.
Akino added that the pressure to sell may ease after Christmas, prompting a further surge in the Nikkei Average. Japan will double tax rates on capital gains and dividends from 10% to 20% starting January 2014.
The country’s Cabinet Office released a monthly economic report Tuesday, omitting the word “deflation” in its description of the economy for the first time in four years, saying instead that “prices hold firm.”
The change in terminology may be small, but will likely be seen as a sign by investors that the government is optimistic that Japan is close to escaping years of falling prices.
The Bank of Japan published its own cautiously positive economic report, in which it said Japan’s economy would likely continue a moderate recovery but faces risks from uncertain global growth and a consumption tax hike due to kick in next April.
Among Japanese gainers were telecommunications provider KDDI Corp. /zigman2/quotes/204923990/delayed JP:9433 +2.23% /zigman2/quotes/209186068/delayed KDDIF -1.92% , which gained 3.1%, and machinery manufacturer Fanuc Corp. /zigman2/quotes/202054799/delayed JP:6954 -0.72% /zigman2/quotes/206262686/delayed FANUF +0.39% , up 1.8%. The yen /zigman2/quotes/210561789/realtime/sampled USDJPY +0.2233% was little changed late Tuesday, trading level at ¥104.20 to the U.S. dollar, from ¥104.19 late Monday in New York.
Chinese stocks traded higher for a second consecutive day, cementing a recovery from over two weeks of losses despite a stubborn cash crunch that has led interbank lending rates to hit a six-month high, starving the system of liquidity.
The stresses began to ease Tuesday, with the benchmark seven-day repurchase agreement rate down to 5.5% from 8.94% Monday, releasing cheaper cash into the financial system and buoying markets. The mainland’s Shanghai Composite Index /zigman2/quotes/210598127/delayed CN:SHCOMP -2.30% managed to achieve gains of 0.2% by the end of the day. Hong Kong’s Hang Seng Index /zigman2/quotes/210598030/delayed HK:HSI -1.92% gained 1.1%.
Shares in Australia gained for a fourth-straight session, with the S&P/ASX 200 /zigman2/quotes/210598100/delayed AU:XJO +0.43% up 0.7%. Banking stocks rose despite news Monday that stricter capital reserve requirements would be imposed on local banks as the new minimums were on the lower side of expectations. Westpac Banking Corp. /zigman2/quotes/203084975/delayed AU:WBC -0.52% /zigman2/quotes/210300378/delayed WEBNF -0.50% and Commonwealth Bank of Australia /zigman2/quotes/200638713/delayed AU:CBA +1.01% /zigman2/quotes/207018701/delayed CBAUF -0.71% added 0.7% and 0.5%, respectively.
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After a slow start, Korea’s Kospi /zigman2/quotes/210598069/delayed KR:180721 -1.00% was last up 0.2%. New Zealand’s benchmark index was a strong performer for a second day running, rising 1% to a three-week high, while Taiwan’s main index closed down 0.1%.
Mobile technology giant Samsung Electronics Co. /zigman2/quotes/209800866/delayed KR:005930 -0.12% /zigman2/quotes/202367843/delayed SSNLF 0.00% was trading 1.3% lower in South Korea after researchers at Israel’s Ben-Gurion University of the Negev said they had found a security vulnerability in the company’s flagship Galaxy S4 smartphone. Samsung has said it takes all such claims seriously and will investigate, but doesn’t believe the problem is as serious as the researchers suggest.
Markets in Australia, New Zealand, Singapore and Hong Kong were all due to close early Tuesday, to break for the Christmas holiday.
Willam Sposato contributed to this article