BOJ lifts Nikkei higher, at 200-day moving average

By Dominic Lau

TOKYO (Reuters) - Japan's Nikkei share average rose on Tuesday to end at its 200-day moving average after the Bank of Japan unexpectedly eased policy by increasing its asset-buying programme to help the economy mired in deflation and hurt by a strong yen.

The Japanese currency weakened against the dollar following the BOJ's announcement that it would add 10 trillion yen to its asset buying and lending scheme, under which it buys government and private debt and lends cheap funds against various types of collateral, to 65 trillion yen.

Exporters climbed, with Toyota Motor Corp <7203.T> up 1.8 percent, Canon Inc <7751.T> adding 1.5 percent and TDK Corp <6762.T> climbing 2 percent.

Real estate stocks were also in demand, with Sumitomo Reality & Development Co Ltd <8830.T>, Tokyu Land Corp <8815.T> and Mitsui Fudosan Co Ltd <8801.T> up between 3.6 and 5.1 percent.

The benchmark Nikkei advanced 0.6 percent to 9,052.07, a fresh three-month closing high.

The Nikkei volatility index shed 7.4 percent, indicating improving risk appetite among investors. The lower the volatility, the higher the risk appetite.

"If we were in a much more bearish global environment, (the BOJ move) would have been taken as inadequate," a dealer at a foreign brokerage said.

"But what you can get in this situation is that if it supports a market that wants to rally anyway, then it can actually be seen as important."

The benchmark Nikkei is up 7 percent so far this year as a brightening outlook for the U.S. economy and an injection of 489 billion euros of three-year loans by the European Central Bank to boost liquidity outweighed disappointing Japanese corporate earnings.

The broader Topix rose 0.6 percent to 786.80 on Tuesday.

Others were also sceptical about the strength of the market's reaction.

"Cash volume is not massive today. I don't know how much conviction is at the back of this move," said another dealer at a foreign bank.

Nearly 2.2 billion shares changed hands, up from the previous session's two-week low of 2.05 billion shares but down from last week's average of 2.37 billion.

Domestic investors have been cashing in recent gains.

Equity mutual funds based in Japan suffered net outflows for a fourth straight month in January, the longest such spell in 15 years, though a recovery in global share prices pushed up asset value by nearly 3 percent.

MS&AD Insurance Group Holdings dropped 1.3 percent on Tuesday after it forecast a net loss of 145 billion yen for the year to March, compared with a previous estimate of a 6 billion yen net profit.

The non-life insurer said it now expects 236 billion yen in payouts.

Peer NKSJ Holdings Inc lost 1.2 percent and Tokio Marine Holdings Inc <8766.T> slipped 0.3 percent.

(Editing by Edwina Gibbs)