Japan’s Nikkei rises 0.6 pct, Bush package eyed

TOKYO, Jan 18 (Reuters) – Japan’s Nikkei average recovered from an early dive to end 0.6 percent higher on Friday, lifted by expectations that President George W. Bush will propose measures to boost the flagging U.S. economy.

Industrial robot maker Fanuc Ltd, one of the biggest drags on the Nikkei in the morning, reversed course and gained 1.9 percent to 9,170 yen.

Major bank shares like Mitsubishi UFJ Financial Group also pared earlier losses as investors started to looking at events ahead. Bush is to speak later in the day in general terms about what kinds of economic measures he would like to see.

“Shares were bought on expectations for U.S. economic measures,” Hiroshi Arano, an adviser to Mizuho Asset Management.

He said the Tokyo market is likely to have hit the bottom as investors have now shifted their attention from subprime problems to a potential U.S. recession.

“We cannot fathom subprime problems and there is no solution, and that’s what has been feeding anxiety. he said. “But for a recession, the government has at least some measures to offer.”

With technicals and valuations strongly suggesting Japanese stocks have been oversold, many participants see the market as ripe for a rebound.

“By now, selling has pretty much run its course, and in this situation a single event could trigger an upward move,” said Ryuta Otsuka of Toyo Securities.

The Nikkei ended the session up 0.6 percent at 13,861.29, and the broader TOPIX index was up 0.8 percent at 1,341.50.

Both indexes fell more than 3 percent earlier in the day.

Mitsubishi UFJ rose 0.3 percent to 975 yen and Mizuho Financial Group Inc climbed 1 percent to 488,000 yen.

Trade volume was active on the Tokyo exchange’s first section, with 2.7 billion shares changing hands, compared with last week’s average of 2.2 billion.

Advancing stocks beat decliners by a ratio of more than three to one.

PAPERS BURNT

Nippon Paper Group plummeted 10 percent to 267,000 yen, extending losses after a furore erupted over Japan‘s major paper producers overstating the volume of recycled paper used in their products, prompting some copier makers to stop selling their paper.

Other paper makers — Oji Paper Co Ltd, Daio Paper Corp, Mitsubishi Paper Mills Ltd and Hokuetsu Paper Mills Ltd — also acknowledged they had overstated the volume of recycled paper in postcards.

Oji Paper was down 4.7 percent at 467 yen, Daido Paper was flat at 853 yen, Mitsubishi Paper fell 1.4 percent to 206 yen, and Hokuetsu Paper lost 2.2 percent to 493 yen.

Nippon Steel Corp, the world’s second-biggest steel maker, jumped 5.2 percent to 663 yen as sentiment improved and investors returned to stocks with solid earnings prospects.

The company is expected to report a record profit for a fourth consecutive year in the business year to March on strong demand for automotive sheet steel and increasing sales in China.

In Osaka, Nintendo Co Ltd also pared earlier losses to gain 3.8 percent to 55,300 yen. (Editing by Mike Miller)