Asian Market Update: Nikkei jumps above 18,000 on Japanese trade balance data showing strength in exports - Japan's January trade balance came in better than expected (a surplus of ¥4.4B while the market was expecting a deficit of ¥140B). Japan's trade surplus with the US fell by 0.1% y/y and for the first time in 2 years. The drop in Japan's trade surplus with the US comes after US Congressional Democrats had complained about the US trade deficit with Japan. The market had expected weaker export to result in a trade deficit, but the trade balance data boosted optimism over the Japanese export sector, sending the Nikkei to above the 18,000 level (for the first time since May 2000). - Bank of Japan's Governor Fukui reiterates that rates will rise gradually: Following yesterday's rate hike, BoJ Governor Fukui continued to convey that the BoJ will seek to raise rates gradually. Fukui also left open the possibility that Japan's CPI could fall into negative territory. Yesterday's BoJ decision underscored their resolve to normalize rate hike levels to contain future risk of asset inflation and a further weakening of the yen, regardless of tame CPI. Many analysts suggest that yesterday's decision may mean that the BoJ will hike rates every quarter. - Major Currencies: EUR/JPY rose to a new all-time above the 159.00 level as the yen continued to weaken across the board. The NZD and AUD are lower on profit-taking after rising sharply during the US session on the soft stance taken on carry trades. The bullish outlook for gold is also supporting the AUD. The NZD/USD pair is holding above $0.7050, which is near a 7-week high, while the AUD is holding near 4-week highs against the USD and above the $0.7900 level. - Asian Currencies: The South Korea Won is weaker against the USD on yen weakness. Reports that South Korea's President Roh may leave the ruling party also added downside to the Korean Won. The Thai Baht is rising against the USD as equities gained for the 3rd consecutive session. The Hong Kong dollar is trading near session highs against the USD as traders are unwinding USD positions ahead of the weekend. - Equities: The Nikkei traded above 18,000 as exporters and banks traded up sharply. Uncertain prospects for global demand for semiconductors and consumer electronics are capping gains on the Nikkei. Japan's broader Topix index continued to rise above more than 15-yr highs. South Korea's Kospi index rose to a new all-time high on Korean Won weakness. The ASX 200 traded higher, and managed to break the 6000 level. Gains were driven by shares of Seven Networks and Oxiana following their profit reports. - Bonds: Japanese bond prices traded mixed. Japan's 10 yr bond prices rose on institutional demand. Two year JGBs traded in negative territory, tracking losses in US Treasuries following stronger than expected US CPI data. - Commodities: Spot gold is slightly lower in Asian trading following sharp gains during the US session. Gold is expected to remain well supported in the near term on expectations that US core inflation yr/yr might have bottomed at 2.6%. Crude oil is higher on supply worries and tensions between the US and Iran.