TOKYO, Oct 1 - Japanese stocks extended gains in Wednesday afternoon trade, as Mizuho and other banks continued to gain steam on a better earnings outlook and a positive headline figure in the Bank of Japan's "tankan" corporate survey. Retailers were also sought after the tankan showed an upbeat forecast for large retailers, but a closer reading of the overall results and the lingering strength of the yen kept some investors wary. The Nikkei average <.N225> at 0503 GMT was up 1.25 percent at 10,346.72, after ending the morning session up only 0.19 percent. The broader TOPIX index <.TOPX> was up 1.11 percent at 1,030.15. "The strength of bank stocks is having a positive effect on the overall market and making investors feel safer about buying," said Masatoshi Sato, senior strategist at Mizuho Investors Securities.
"There was some negative news about Mitsui Mining having to revise its restructuring plan that may have held back the bank shares at one point earlier, but they seem to now have overcome that and people are aggressively buying." Sentiment towards the sector continued to be boosted by Mitsubishi Tokyo Financial Group's (MTFG) <8306.T> Tuesday move to sharply raise its earnings forecasts for the year to March, on the back of dramatic progress in eliminating bad loans. Shares in Japan's third-largest bank were up 6.1 percent at 748,000 yen after earlier rising to their highest level since December. Rival Mizuho Financial Group <8411.T>, the world's largest bank by assets, was up 4.8 percent at a record high of 262,000 yen. Japan's other two big banks, Sumitomo Mitsui Financial Group <8316.T> and UFJ Holdings <8307.T> also jumped, and the four megabanks were the top four most heavily traded shares on the main board by value. SMFG rose 6.67 percent to 480,000 yen, while UFJ was up 7.74 percent at 473,000 yen. Shares of Japan's big banks had already posted meteoric recoveries in the first half ended on Tuesday -- with UFJ's shares rising 272 percent -- but investors kept pouring into them as lingering worries about the rise of the yen continued to encourage some to focus on domestic issues, with retailers and real estate firms also in vogue on Wednesday.
Retailers also received a boost after the tankan showed the index for large retailers was expected to rise to zero in December from minus 14 in September. The reading helped send shares in Tokyu Department Store Co Ltd <8232.T> up 10 percent to 110 yen, while fellow department store operator Isetan Co Ltd <8238.T> rose 7.57 percent to 1,108. But indications of a slowdown in the improvement in overall corporate sentiment led to caution, especially as the results did not reflect a recent rise in the yen, which threatens to cut profits and reduce demand for the goods of Japanese exporters. The BOJ said the closely watched index for large manufacturers in the tankan survey rose to its highest level in nearly three years at plus 1 in September from minus 5 three months earlier. But the index is likely to show a smaller figure of plus three in December, the central bank said. "The estimate for December of plus three looks hard to achieve if the dollar falls to around 110 yen or below," said Koji Muneoka, head of domestic sales trading at HSBC Securities.//