Tokyo shares posts biggest gain since June 2013; Abenomics in focus as ministers quit

Tokyo stocks jumped 3.98 per cent by the market's close on Monday, following sharp gains on Wall Street and as a weaker yen boosted exporters' shares. -- PHOTO: REUTERS
Tokyo stocks jumped 3.98 per cent by the market's close on Monday, following sharp gains on Wall Street and as a weaker yen boosted exporters' shares. -- PHOTO: REUTERS

TOKYO (Reuters) - Tokyo stocks jumped 3.98 per cent by the market's close on Monday, following sharp gains on Wall Street and as a weaker yen boosted exporters' shares.

Also underpinning the market was news that Japan's US$1.2 trillion public pension fund will likely raise its allocation to domestic stocks to about 25 per cent from 12 per cent at present.

The Nikkei share average added 578.72 points to end at 15,111.23, recouping most of the losses posted last week. The broader Topix index of all first-section shares jumped 4.0 per cent, or 47.12 points, to 1,224.34.

But some analysts remained cautious, and said any rebound may be short-lived.

"With Halloween just around the corner, the market was spooked by 'ghosts' and these ghosts will probably stick around longer," said Hiroyuki Nakai, chief strategist at Tokai Tokyo Research Center, citing persistent concerns about the sputtering European economy, worries about what could happen after the U.S. Federal Reserve ends its bond-buying campaign, and the effects of the Ebola epidemic.

While shares in the Japanese market soared mostly on external factors on Monday, a domestic political scandal could have a negative impact in the mid-to-long term, analysts said. Japanese Prime Minister Shinzo Abe said on Monday afternoon that he had accepted the resignations of Trade Minister Yuko Obuchi and Justice Minister Midori Matsushima over questionable political spending and alleged violation of election law, respectively.

"This is a serious blow to Abe's administration, maybe the most serious one since his administration began two years ago," said Kyoya Okinawa, head of global equities at BNP Paribas. "The fact that two of his five female members resigned is very bad and should hurt his support rate in the longer term as boosting women in his cabinet and in the workforce was supposed to be part of his growth strategy."

Okazawa said that if Abe's approval rate falls, he will likely have a difficult time pushing through measures to revive the economy.