Nikkei at 4-mth closing high as confidence spreads

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By Elaine Lies

TOKYO, May 15 (Reuters) - Japan's Nikkei stock average climbed 0.9 percent to a four-month closing peak on Thursday, led higher by growing market confidence symbolised by Sony Corp (6758.T: Quote, Profile, Research), which had its greatest one-day gain in nearly seven months after forecasting a bigger profit than expected.

Nippon Steel Corp (5401.T: Quote, Profile, Research) surged after a report that Toyota Motor Corp (7203.T: Quote, Profile, Research) has agreed with it and other top Japanese steelmakers to pay over 30 percent more for sheet steel, while bank shares, sold recently, also powered higher after a report that No. 2 bank Mizuho Financial Group (8411.T: Quote, Profile, Research) plans an effective 10-for-1 stock split. Exporters, boosted in early trade by a weaker yen, were still strong in the afternoon despite the dollar slipping back to under 105 yen <JPY=>, although many had trimmed gains.

"Sony's results are being taken very positively by the market, setting off expectations of more rises down the road, and this is working as a big overall plus psychologically," said Katsuhiko Kodama, a senior strategist at Toyo Securities.

But other market players said Sony was only one part of a larger picture.

"The earnings period is near its end now and there's growing reassurance because it wasn't as grim as feared," said Nagayuki Yamagishi, a strategist at Mitsubishi UFJ Securities.

After the close, Mizuho Financial Group (8411.T: Quote, Profile, Research) posted a 50 percent decline in full-year profit, hurt by heavy subprime losses at its brokerage unit, but forecast a rebound ahead.

In one sign of growing confidence in Japanese shares, a monthly poll of 191 international investors by Merrill Lynch found that the percentage of investors intending to increase their holdings of Japanese shares over the next year turned positive for the first time since August 2007. The poll added that the number of investors pessimistic on Japanese companies' earnings outlooks had fallen dramatically from 15 percent in April to 3 percent this month. Market players said that foreign hedge funds appeared to be active, as they had been earlier this week. Kodama, at Toyo Securities, also said that individual investors appeared to have stepped in to snap up banks and blue-chips.