Japanese Stocks Advance on U.S. Economic Outlook, Oil Price; Canon Jumps

Japanese stocks rose, sending benchmark indexes to their highest levels in almost nine months, after the Federal Reserve raised its forecast for U.S. economic growth and oil prices increased.

Canon Inc., a camera maker that gets about 80 percent of its revenue abroad, climbed 3.9 percent. Honda Motor Co., which gets 84 percent of its sales overseas, gained 1.1 percent. Inpex Corp., Japan’s No. 1 oil explorer, jumped 3 percent. Resona Holdings Inc. advanced 2.5 percent after the Asahi newspaper said it will repay public funds.

“Expectations are increasing that the U.S. economy will expand more strongly than previously forecast,” said Ikuo Mitsui, who helps manage $270 million at Vivace Capital Management Co. “With strong fundamentals, it’s unlikely that investors will shift to a sell-strategy for stocks.”

The Nikkei 225 Stock Average climbed 0.3 percent to 10,836.64 at the close in Tokyo. The broader Topix index gained 0.7 percent to 974.14, with more than twice as many stocks advancing as falling. The Topix rose for a ninth day, the longest winning streak since a 13-day run that ended Aug. 4, 2009. Both measures closed at their highest levels since April 30, 2010.

The Topix has gained 8.4 percent this year, the most among the major Asia-Pacific indexes. That has driven the average price of stocks in the gauge to 16.6 times estimated earnings, the highest level since July.

‘Improving Economic Sentiment’

“Economic sentiment is improving and that is supporting the stock market,” said Mitsushige Akino, who oversees about $450 million in Tokyo at Ichiyoshi Investment Management Co. “Investors expecting stocks to rise further are increasing” because of positive economic data and strong corporate earnings.

Standard & Poor’s 500 Index futures slid 0.1 percent today. The index rose 0.6 percent yesterday in New York to a 32-month high after the Fed raised its forecast for economic growth and earnings improved.

Officials “continued to express disappointment in both the pace and the unevenness of the improvements in labor markets,” while also judging the recovery to be on a “firmer footing,” the Federal Open Market Committee said in minutes of its Jan. 25-26 meeting, released today in Washington. Policy makers raised projections for economic growth this year and made little change to forecasts after 2011 or for unemployment and inflation.

U.S. Housing Starts

Commerce Department figures showed that housing starts climbed 15 percent to a 596,000 annual rate. The median forecast in a Bloomberg News survey called for a 539,000 rate. Work started on 78 percent more dwellings with two or more units, overshadowing a drop in single-family houses that indicates the housing market continues to struggle.

“An improvement in the housing market and consumer spending is a first step to a self-sustaining recovery,” Ichiyoshi Investment Management’s Akino said.

Canon climbed 3.9 percent to 4,105 yen and was the biggest support for the Topix and the Nikkei. Sony Corp., an electronics maker that derives 70 percent of its sales abroad, rose 1.8 percent to 3,035 yen. Honda advanced 1.1 percent to 3,695 yen, the highest since August 2008.

Honda may buy back 40 billion yen ($478 million) of its shares, spokeswoman Akemi Ando said by phone from Tokyo today. The Nikkei newspaper reported Honda’s plan to buy back shares earlier today.

Oil Gains

Inpex jumped 3 percent to 579,000 yen. Japan Petroleum Exploration Co., the nation’s second-biggest oil driller, rose 2.8 percent to 3,870 yen.

Inpex’s shares also gained after Nomura increased its price estimate. The shares are cheap even after they rose on higher oil prices, Nomura analyst Shigeki Matsumoto wrote in a Japanese-language report dated yesterday. Matsumoto, who rates the company “buy,” boosted a 12-month share price estimate to 740,000 yen from 640,000 yen.

Crude oil for March delivery rose 0.8 percent to settle at $84.99 a barrel in New York yesterday.

Shipping lines rose as the Baltic Dry Index, a measure of shipping costs for commodities, increased for an eighth straight day yesterday. Nippon Yusen K.K., the country’s biggest shipping line by sales, gained 1.3 percent to 383 yen. Mitsui O.S.K. Lines Ltd., the second-biggest, advanced 1.4 percent to 582 yen. Kawasaki Kisen Kaisha Ltd., the No. 3, climbed 2.4 percent to 378 yen.

Resona Climbs

Resona Holdings gained 2.5 percent to 457 yen and was the most-actively traded stock in Japan. The lender will repay 850 billion yen in public funds by buying back shares from the Japanese government, the Asahi newspaper reported, without saying where it obtained the information.

“The cost Japan paid for the nation’s financial companies’ bad debts is finally repaid, and this means the balance sheet of Japanese banks will be healthy,” Vivace Capital Management’s Mitsui said.

Other financial companies also advanced. Sumitomo Mitsui Financial Group Inc., Japan’s No. 2 bank by market value, advanced 1 percent to 3,170 yen. Nomura Holdings Inc., Japan’s largest brokerage, gained 1.1 percent to 552 yen. Tokio Marine Holdings Inc., a casualty insurer, leapt 4.1 percent to 2,851 yen.

Of the 1,554 companies in the Topix Index that have reported results since Jan. 1 for the latest quarter, 188 have exceeded analysts’ estimates, while 137 have missed them, according to data compiled by Bloomberg.

To contact the reporter on this story: Akiko Ikeda in Tokyo at iakiko@bloomberg.net.

To contact the editor responsible for this story: Nick Gentle at ngentle2@bloomberg.net.

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