Asia's biggest stock exchange finished its final day of trading for the year yesterday on a high note, with stocks rallying to cap a year, during which the benchmark gained 7.6 percent on hopes Japan's economy is on a rebound.
Tokyo Stock Exchange shares closed higher across a broad range of sectors, including banking, retail and export-related issues, as traders and guests clapped hands rhythmically to close the year according to Japanese tradition after a half-day session. The yen was up against the US dollar.
The Nikkei Stock Average was up 107.20 points, or 0.94 percent, closing the year at 11,488.76 points -- the best finish for the blue-chip index since July 13, when it closed at 11,608.62 points. On Wednesday, the Nikkei lost 42.57 points, or 0.37 percent.
The dollar bought ?103.73 at 3pm yesterday, up ?0.51 from late Wednesday in Tokyo but below the ?103.80 it bought in New York later that day.
On the stock market, investors bought on expectations of a global economic recovery next year.
Technology issues Advantest Corp and Canon Inc and automakers Toyota Motor Corp and Honda Motor Co closed higher. Banks UFJ Holdings Inc and Mitsubishi Tokyo Financial Group Inc also rose, as did major retailer Ito-Yokado Co, as well as real estate Mitsui Fudosan Co.
Many market analysts expect the Nikkei index to rise gradually toward the latter half of next year as global economies recover and production and sales at Japan's major exporters begin to rise.
US Morgan Stanley equities strategist Naoki Kamiyama said if the market factors in the outlook for an end to deflation and a worldwide cyclical economic recovery, the Nikkei "will rise toward 13,000 toward the end of 2005."
Kamiyama said the next year will be the final year of Japan's structural reforms.
Some analysts say the danger of deflation -- or continually falling prices that brings down wages and profits that have plagued Japan for years -- may be over next year. Japan's central bank has kept interest rates virtually at zero for the past three years to help fight deflation.
This year, strong market hopes for an end to deflation helped the Nikkei index climb nearly 17 percent from a year-low of 10,365.40 reached on Feb. 10 to a year-high of 12,163.89 on April 26, but those hopes then gave way to the reality of a slow slide in prices.
For the whole year, the Nikkei gained 7.6 percent from the end of last year on signs the world's second-largest economy has been on the rebound for the last two years thanks to robust exports, especially to China and other Asian countries.