Weak yen propels Nikkei to longest run of weekly gains since 1959

People look at a stock index board outside a brokerage in Tokyo January 30, 2013.

TOKYO (Reuters) - Japan's Nikkei average marked its 12th straight week of gains, its longest winning streak in 54 years, as investors bought companies that sparkled during the earnings season and stayed optimistic that a weak yen would boost bottom lines.

The Nikkei .N225, which reached 11,237.84 during Friday's session, ended 0.5 percent up at a 33-month closing high of 11,191.34. The index gained 2.4 percent this week, giving it the longest run of weekly gains since 1959.

Sharp Corp (6753.T) gained 5.8 percent after media reports said the company would post its first operating profit in five quarters in the three months through December on strong sales of home appliances and mobile phones.

After the bell, Sharp reported it logged an operating profit of 2.6 billion yen for the last three months of 2012.

For the overall market, "earnings haven't been great so far, but everyone had very low expectations of the last quarter, partly because the yen only weakened at the very end of it," said Hirokazu Fujiki, manager of investment at Okasan Securities.

"But sentiment is extremely strong at the moment. The Nikkei has broken out of the box market it was stuck in for a lot of January and is on its second wind. I can see that continuing until March, but then people might do a reality check and see if the economy is actually improving," he said.

The Nikkei has rallied 29 percent since mid-November, when Shinzo Abe, then a candidate for leader of the opposition and now prime minister, started calling for aggressive monetary policy and fiscal expansion, an economy policy now known as "Abenomics".

Expectations that Abe could pull Japan out of deflation and reinvigorate its economy have driven the yen down 10 percent against the dollar, boosting exporters. A weaker yen translates to higher revenue when overseas sales are repatriated. On Friday, the yen hit a 32-month low of 92.2 versus the dollar.

Financials and real estate, which could benefit from Abe's reflationary policies, have nearly caught up with rises in exporters.

While the auto sector has gained 47 percent since mid-November, banking .IBNKS.T has added 40 percent and real estate has advanced 31 percent in the same period.

Nomura Holdings Inc (8604.T)'s 12.8 percent increase in operating profit for the October-December quarter disappointed some investors hoping for larger gains from the Nikkei rally. Nomura shares fell 2.7 percent on Friday.

Shun Maruyama, chief Japan equity strategist at BNP Paribas, said that investors who added exporters to their portfolios as the yen weakened have started to shift to sectors sensitive to the domestic economy.

"They are looking for a mid-to-long term theme in Japanese shares as the yen's sharp weakness will not last forever. People are counting on stocks which are expected to fare well if the country is out of deflation," he added.

The third-largest mobile carrier, Softbank Corp (9984.T), jumped 5.7 percent after posting a 23.7 percent rise in operating profit in the latest quarter, thanks to strong iPhone subscriptions. Softbank said it was on track to hit its annual operating profit target of 700 billion yen this financial year.

Japan Tobacco Inc (2914.T) bucked the trend in firms with high overseas exposure, booking an operating profit increase of 13.2 percent for the nine months ended December 14, after expanding its market share in Europe and maintaining sales despite the downturn in the region.

Its share price jumped 4 percent after the company maintained its operating profit forecast for the year ending March 31 at 511 billion yen, which would be 11.3 percent above the previous year.

Japanese companies have reported lacklustre earnings for the October-December period: Of the 54 Nikkei companies that announced quarterly results by Thursday, nearly two-thirds had missed market expectations, according to Thomson Reuters StarMine. That compared with 56 percent in the previous three months.

But market observers said that investor focus is on forecasts for the full current year as well as the year ending March 2014 - if companies have a strong outlook for the foreseeable future, the market will likely dismiss poor quarterly results.

The broader Topix added 0.3 percent to 942.65 in active trade, with 3.69 billion shares changing hands. Between January 21-25, the average daily volume was 3.44 billion shares.

(Additional reporting by Sophie Knight and Ayai Tomisawa; Editing by Richard Borsuk)