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Stocks

Wage hike plans get foreigners pumped up over Japan stocks

TOKYO -- Share prices here jumped Thursday as planned pay raises at Japanese companies bolstered foreign investors' confidence in the market.

     The Nikkei Stock Average temporarily topped 19,000 and ended up 267 points at a 15-year high of 18,991.

     "Wage hikes are the key," said Hirokazu Kabeya of Daiwa Securities said. "Foreign investors are very interested."

     Toyota Motor announced an across-the-board raise and gained 199 yen ($1.62) at one point Thursday to touch a nearly eight-year high of 8,277 yen. Insurers, which also agreed to increase pay, enjoyed the biggest gain of any industry-based subindex in the Nikkei average.

     Stock prices tend to rise here in years of widespread wage hikes. Investors could grow even more optimistic if more companies decide on raises, said Alex Miller of Citigroup Global Markets Japan.

     In a February trip to the U.K., Taku Arai of Schroder Investment Management was surprised by how bullish investors there were on Japanese stocks. Increasing pay signals the growing strength of businesses.

     "Foreign players see the raises as the start of a virtuous cycle," Arai said.

     Overseas investors purchased a net 210 billion yen in Japanese stocks last week, according to the Tokyo Stock Exchange. This brought the total for the last four weeks to 647 billion yen, making them one of the most prominent players here.

     Downside risks to Japanese shares are also limited, since pension funds, the Bank of Japan and other public actors are snapping them up. Buying Japanese stocks seems unavoidable because of the favorable supply-demand balance here, said Basil Dan of Credit Suisse Securities (Japan).

     But rapidly surging prices could be cause for concern. The Nikkei average rose 2,195 points from Jan. 14 to March 12 -- far more than the 1,159 it gained in all of 2014.

     "Stocks here are starting to seem less undervalued," said Keita Kubota of Aberdeen Investment Management. "Unless companies can show a clear growth trajectory, they will have a harder time attracting investors."

(Nikkei)

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