Asia stocks trade higher; Japan surges

SYDNEY (MarketWatch) � Japan shares neared a four-and-a-half-year high Monday on reports Asian Development Bank chief Haruhiko Kuroda would become the next governor of the nation�s central bank, with the market a stand-out in a broadly positive session for Asia-Pacific stocks.

Japan�s Nikkei Average JP:100000018 �leapt 2.4% to its highest close since late September 2008.

Australia�s S&P/ASX 200 AU:XJO ended the day up 0.8%, Hong Kong�s Hang Seng Index HK:HSI �advanced 0.2% and the Shanghai Composite Index CN:000001 �rose 0.5%.

South Korea�s Kospi KR:SEU fell 0.4%.

Click to Play Week Ahead: Bernanke, Italy and Japan

A wide mix of events are likely to buffet markets this week, including Bernanke's testimony that might clarify Fed policy, Italy's very uncertain elections and the appointment of a new Bank of Japan governor.

�It�s been a pretty crazy day in Asia given all the information the markets have had to price in and absorb,� said Chris Weston, chief market strategist at IG Markets. Overall, �Asian equities have found good buying interest,� he said.

Japanese stocks soared as reports Kuroda would be selected to head the Bank of Japan and that Kikuo Iwata will be one of his two deputy governors, helped fuel fresh optimism for strong deflation-fighting policy measures.

Cr�dit Agricole strategists called Kuroda �aggressive and dovish� on monetary policy and noted that Iwata �has been a �stubborn critic� of the Bank of Japan�s monetary policies for decades. They said the nominations �show a clear preference for [Japanese Prime Minister Shinzo Abe�s] reflationary stance.�

Since late last year, Japanese stocks have gyrated along with changes in sentiment over the future direction of Tokyo�s monetary policy, with markets broadly gaining on news suggesting plans for aggressive easing that could help lift the economy.

While shares have also fallen on hints of policy stagnation, optimism has outweighed pessimism so far this year, with the Nikkei Average up 12.2% and the dollar gaining 8.6% against the yen.

Japanese financials � one of the sectors that stand to benefit if Japan returns firmly to inflation � performed strongly Monday in Tokyo.

Sumitomo Mitsui Financial Group Inc. JP:8316 �SMFG rose 1.6%, while Daiwa Securities Group Inc. JP:8601 DSEEY �climbed 3.6%, and Shinsei Bank Ltd. JP:8303 SKLKY �added 3%.

Exporters also rallied after the Kuroda news triggered a concomitant drop in the yen, as Sony Corp. JP:6758 �SNE �rose 3.4%, Olympus Corp. JP:7733 �OCPNF �advanced 3.1%, and Advantest Corp. JP:6857 �ADTTF �jumped 3.8%.

The dollar USDJPY �bought 94.20 yen Monday, sharply higher than the �93.43 recorded in North American trading late Friday.

Japanese Prime Minister Abe is expected to make Kuroda�s nomination official by mid-week. The nomination must also be approved by parliament. Read: Kuroda to be Bank of Japan head: reports.

While the U.K. saw its credit rating downgraded by Moody�s late last week, a survey of the German business climate also out Friday improved by more than expected, boosting European and U.S. stock markets and setting the stage for Monday�s broad gains in Asia. Read: U.S. stocks rally; H-P boosts Dow index