Japan report points
to recovery; stocks climb

The Nikkei closes above 18,000

TOKYO -- A report showing that major Japanese manufacturers' faith in the economy is growing sent Japan's stock market surging to its highest level in more than a year and a half today.

The results of the Bank of Japan's closely watched quarterly "tankan" survey raised hopes that the long-ailing economy might finally be on the mend.

In response to the report, the benchmark 225-issue Nikkei stock average added 202.59 points, or 1.13 percent, to close at 18,135.06, the highest since 18,341.96 on Sept. 25, 1997. It also was the first close above 18,000 in 21 months.

The yen, meanwhile, fell to a six-week low against the dollar as the Japanese central bank sold yen to prevent a stronger currency from hampering the country's economic recovery.

Today's intervention is the fifth time the Ministry of Finance has spent money to steer the Japanese currency's value since June 10. The central bank bought $3 billion to $5 billion today, traders estimate, and purchased more than $20 billion worth of dollars and euros in June.

"They (Japan's central bank) very much want to prevent the yen from strengthening because then it would start hitting exporters," said John Wills, who helps oversee $500 million at John Hancock Advisers International Ltd.

The yen fell more than 1 percent to as low as 122.90 per dollar today, its weakest since May 26 when it was at 122.93.

Without intervention, the yen could rise as overseas investors snap up yen to buy stocks on hopes the Japanese economy is pulling out of recession.

The Bank of Japan's "tankan" survey today buoyed that optimism, showing that confidence among large manufacturers had improved since the last poll in March, recording its biggest advance since August 1994. Optimism rose among small- and medium-sized manufacturers as well, marking the first time since November 1996 that the bank's index for measuring business sentiment jumped for companies across the board.

The growing confidence comes amid a recent surprise growth spurt in the Japanese economy and a drop in the jobless rate.

Japan's gross domestic product -- the measure of all goods and services produced within its borders -- expanded 1.9 percent for the first quarter of this year after more than a year of economic recession.