* Nikkei jumps to near highest since September 2008
* Yen slumps after G20 avoids direct criticism of Tokyo
* China demand eyed as it returns from one-week holiday
* European shares likely ease
By Chikako Mogi
TOKYO, Feb 18 (Reuters) - Japanese shares surged 2.1 percent
on Monday and were on the brink of revisiting four-year highs
tapped recently, as the yen slumped after Tokyo dodged direct
criticism from G20 peers on its aggressive reflation plans that
have weakened the currency.
The G20 opted not to single out Tokyo, but committed members
to refrain from competitive devaluations and said monetary
policy would be directed only at price stability and growth.
Japan said this decision is a green light to pursue its
The market's focus is now on Prime Minister Shinzo Abe's
nominee for the next Bank of Japan governor. Abe is expected to
announce his choice in coming days.
Sources told Reuters on Friday that former top financial
bureaucrat Toshiro Muto is leading the field of candidates to
govern the bank. He may intensify stimulus efforts to energise
the economy but might not pursue unconventional easing measures.
"The G20 basically gave tacit approval for currency
weakening as a result of monetary easing, and not intervention.
So that puts focus on what the BOJ will do next. As long as the
BOJ shows its seriousness about stamping out deflation, the
yen's decline will likely be tolerated," said Citibank Japan
chief FX strategist Osamu Takashima.
The dollar gained 0.5 percent to 93.97 yen inching
closer to its highest since May 2010 of 94.465 hit on Feb. 11.
The euro added 0.3 percent to 125.34 yen, still below
its peak since April 2010 of 127.71 yen touched on Feb. 6.
The Nikkei average closed up 2.1 percent as
exporters and banks led the pack on the softening yen, after
surging as much 2.4 percent earlier to come close to its highest
level since September 2008 of 11,498.42 tapped on Feb. 6.
"The G20 effect is already seen in Abe's general comments on
forex today which steered away from giving specifics on a
preferred level or direction for the yen," said Yunosuke Ikeda,
a senior FX strategist at Nomura Securities.
Abe said on Monday that the BOJ's monetary easing is aimed
at beating deflation, not at manipulating the forex market and
weakening the yen, and said correcting excessive yen rises
would be an appropriate policy direction. Previously, Japanese
officials have noted that the current yen selling was a
correction to the past excessive yen strength.
The yen's weakness weighed on emerging Asian currencies
while South Korean shares eased 0.3 percent on concerns
about the eroding competitive edge for the country's exporters.
Japan will keep pursuing its current policy, said Yuna Park,
a currency and bond analyst at Dongbu Securities in Seoul. "The
rest of Asia will not just wait and see. That will put more
pressure on Asian currencies," he said.
A weaker yen would make other currencies relatively stronger
against the dollar and fuel speculation that other Asian
countries could step in to curb the strength of their
currencies, Nomura's Ikeda said.
The MSCI's broadest index of Asia-Pacific shares outside
Japan paused, after moving in a narrow range.
The pan-Asian index briefly hit a 18-1/2-month high on Friday
and had its best performance since the week of Jan. 6 with a 1.2
percent weekly gain.
Australian shares led the pan-Asian index with a 0.6
percent rise as a string of earnings reports supported a view
that the local economy was in better-than-expected shape.
Markets in China and Taiwan resumed trading after a
Indonesian stocks inched up 0.1 percent after
setting a record high for a fifth straight session on Friday,
while shares in Thailand were up 0.2 percent as the
country's economy grew a robust 3.6 percent in the fourth
quarter from the previous three months.
European markets may track lower, with financial
spreadbetters predicting London's FTSE 100, Paris's
CAC-40 and Frankfurt's DAX would open down 0.1
percent. U.S. stock futures were barely changed. U.S.
markets will be closed on Monday for the President's Day
Data from EPFR Global on Friday underscored that a
consolidation was underway in global equities after their recent
rally. It showed investors worldwide pulled $3.62 billion from
U.S. stock funds in the latest week, the most in ten weeks after
taking a neutral stance the prior week. But demand for emerging
market equities remained strong, with investors putting $1.81
billion in new cash into stock funds, the fund-tracking firm
Commodities markets awaited clues on demand from China, the
"China's overall economy is still strong, so the appetite
for base metals after Chinese New Year will gradually pick up,"
said Helen Lau, senior commodity analyst at UOB-Kay Hian in Hong
London copper fell 0.4 percent to $8,170 a tonne as
traders played catch up after a week-long holiday in China, with
worries about the euro zone economy weighing on sentiment.
U.S. crude fell 0.2 percent to $95.68 a barrel but
Brent inched up 0.1 percent to $117.82.
Gold rebounded from a six-month low on bargain
hunting and as jewellers in China returned to the physical
market after the Lunar New Year holiday.