*Nikkei rebounds more than 7 pct before paring gains
*BOJ rate cut talk spurs rise, weaker yen also a boost
*But rises to be limited as worries about economy cling
(Adds stocks, details)
By Elaine Lies
TOKYO, Oct 29 (Reuters) - Japan's Nikkei average jumped 6.4
percent on Wednesday as Sony Corp <6758.T> and other exporters
surged after the yen weakened on talk that the Bank of Japan will
cut interest rates at a policy meeting later this week.
The BOJ will consider cutting rates but will watch market
conditions before making a final decision, a source informed on
the matter told Reuters. []
The Nikkei business daily also reported on Wednesday without
citing sources that the central bank is leaning towards cutting
its 0.5 percent target for the unsecured overnight call money
rate to 0.25 percent.
Investors took heart, buying beaten-down shares such as banks
and carmakers, with Honda Motor Co <7267.T> and Toyota Motor Corp
<7203.T> both climbing.
The yen edged up after posting its biggest daily fall against
the U.S. currency since 1974 [] on Tuesday on the Nikkei
report of a BOJ rate cut. The dollar was fetching around 97.48
yen by late morning in Tokyo. <JPY=>
Market players welcomed the BOJ news, which led to active
trade for a third successive day and appeared set to put the
benchmark Nikkei <> on course for two straight days of gains
By the end of morning trade it was up nearly 1,000 points from
Monday's close.
"Hopes of a BOJ rate cut are everything," said Masayoshi
Okamoto, head of trading at Jujiya Securities.
But he and others remained wary, saying long-term measures to
tackle the flagging global economy and shore up the sagging
dollar have yet to be taken.
"As long as the dollar is below 100 yen there will be worries
about Japanese company earnings in the second half of this
business year, limiting the Nikkei's rebound," Okamoto said.
Major exporters such as Honda, Panasonic Corp <6752.T> and
Canon Inc <7751.T>, all of which announced results this week,
have based their earnings projections on a dollar rate of 100 yen
and a euro rate of 135 yen.
Some said worries about the global economy are deep-rooted
and cannot be completely erased even with the prospects of
another wave of central bank rate cuts.
"There's still a lot of fear out there about the long-term
issues since no solutions have yet been devised for these. We
need some kind of concrete economic plan from the United States
in particular," said Yutaka Miura, a senior technical analyst at
Shinko Securities.
TIME FOR REBOUND
Others said it had simply been time for a rebound, given how
far the Nikkei had fallen and how cheap shares had become.
The Nikkei's slide to a 26-year low drove its price-to-book
ratio below 1 to 0.87 as of Monday, a rare development that means
the value of all companies in the index is below the total value
of the assets they hold.
"Based on technical factors such as the 25-day moving
average, a recovery to the 9,000 level isn't totally impossible,
but gloomy investor sentiment may make this hard," said Toshio
Sumitani, general manager at investment information department of
Tokai Tokyo Securities.
Firms announcing first-half earnings later on Wednesday
include Sony and Toshiba Corp <6502.T>.
Honda surged 13.6 to 2,345 yen despite cutting its annual
profit forecast on Tuesday, with net profit for the business year
to March 31 expected to be 485 billion yen ($5.20 billion), down
19 percent from last year and lower than its previous forecast of
490 billion yen. []
Toyota gained 9.8 percent to 3,480 yen.
Banks, savagely battered over the past few days on worries
they might have to raise capital to cope with portfolio losses,
also benefited, with the banking sub-index <.IBNKS.T> gaining 6.7
percent.
Japan's biggest bank Mitsubishi UFJ Financial Group <8306.T>
rose 8.7 percent to 599 yen and second-ranked Mizuho Financial
Group <8411.T> gained 3.2 percent to 221,800, both having sharply
pared earlier gains. No.3 bank Sumitomo Mitsui Financial Group
<8316.T> rose 5.7 percent to 354,000 yen.
Sony gained 2.7 percent to 2,050 yen and Canon rose 4.9
percent to 2,680 yen.
Trade was active on the Tokyo exchange's first section, with
1.2 billion shares changing hands, compared with last week's
morning average of 986.5 million.
Advancing stocks outpaced declining ones by more than 7 to 1.
(Reporting by Elaine Lies; Editing by Michael Watson)
