Nikkei 225 Advances as Japan Economy Beats Estimates After Quake

Japan’s Nikkei 225 Stock Average rose the most in more than six weeks after gross domestic product shrank less than economists expected, signaling the country is rebounding from March’s earthquake disaster.

Toyota Motor Corp. (7203), the world’s largest carmaker, climbed 2.9 percent after Finance Minister Yoshihiko Noda pledged to take “bold action” to curb gains in the yen. Exporters including Sony Corp. (6758) also got a boost after U.S. retail sales gained the most in four months. Nintendo Co. surged 9.8 percent on speculation the gamemaker may be included in the Nikkei 225 if Osaka Securities Exchange Co. merges with the Tokyo bourse.

“Investors were trying to avoid risk last week, but the better-than-expected GDP figures, easing yen gains and better U.S. retail sales have helped restore some calm,” said Seiichiro Iwamoto, who helps oversee about $35 billion at Mizuho Asset Management Co. in Tokyo. “Still, there’s no way of knowing if this will continue. We might see some big ups and downs in the market.”

The Nikkei 225 rose 1.4 percent to 9,086.41 at the 3 p.m. close in Tokyo, its biggest gain since June 29. The broader Topix index advanced 1.2 percent to 777.12. The gauge dropped 4.1 percent last week as sentiment weakened amid signs Europe’s debt crisis may spread and after Standard & Poor’s cut the U.S. credit rating.

Japan GDP

The decline reduced the average price of stocks in the Topix to 0.91 times book value, the lowest level since March 2009. A level below 1 means a company’s assets are worth more than its market capitalization.

Gross domestic product shrank at an annualized 1.3 percent rate for the quarter ended June 30, Japan’s Cabinet office said today. The contraction was less than the median estimate of a 2.5 percent drop by 25 economists surveyed by Bloomberg News.

A magnitude-9 earthquake and tsunami devastated Japan’s northeast coast on March 11, leaving about 20,000 people dead or missing, causing an estimated 16.9 trillion yen ($220 billion) in damage and triggering the world’s worst nuclear accident since Chernobyl. Disruptions to supply chains caused exports to plunge 18.1 percent last quarter from the previous three months on an annualized basis, the Cabinet Office said.

Futures on the Standard & Poor’s 500 Index advanced 0.9 percent today. The index gained 0.5 percent in New York on Aug. 12 after U.S. retail sales rose the most since March, showing consumer spending in the world’s biggest economy was holding up at the start of the third quarter.

‘Unstable Situation’

Japanese exporters also got a boost after the yen weakened. Japan’s finance minister said he is ready to sell the currency again to protect the country’s exporters. The yen has gained 5 percent against the dollar in the past three months.

“An unstable situation is continuing,” Noda said during a talk show yesterday on public television broadcaster NHK. “As foreign-exchange market matters are my prerogative, I will continue to closely watch the markets and take bold action if it becomes necessary.”

Toyota, which had its operating profit cut by 50 billion yen last quarter because of the currency’s appreciation, climbed 2.9 percent to 2,901 yen. Honda Motor Co., which counts North America as its biggest market, rose 3.4 percent to 2,624 yen. Sony, Japan’s biggest exporter of consumer electronics, advanced 3.9 percent to 1,694 yen.

The yen depreciated to 77.1 against the dollar, compared with 76.81 at the close of stock trading in Tokyo on Aug. 12. Against the euro, Japan’s currency weakened to 110.26 from 109.06. A weaker yen boosts the value of overseas income at Japanese companies when converted into their home currency.

Nintendo, Murata

Stocks listed on the Osaka Security Exchange including Nintendo, Murata Manufacturing Co. and Omron Corp. (6645) advanced after the Yomiuri newspaper reported on Aug. 13 that Tokyo Stock Exchange Inc. is close to reaching a takeover agreement with the Osaka bourse. While both exchanges denied the report, it spurred speculation some companies listed in Osaka may be included in the Nikkei 225.

Nintendo surged 9.8 percent to 11,970 yen, the most since November 2008. Murata Manufacturing, a Kyoto-based electronic parts maker that supplies capacitors for Apple Inc.’s iPhone, advanced 3 percent to 4,875 yen. Omron, which makes products ranging from digital thermometers to ticket gate machines, climbed 4 percent to 1,883 yen.

Isetan Mitsukoshi Holdings Ltd. (3099), a department-store operator, jumped 5.5 percent to 801 yen, the most on the Nikkei 225. The company boosted its full-year profit forecast by 83 percent to 33 billion yen ($428 million), citing deferred tax assets. The company will pay an annual dividend of 10 yen per share this year, up from the previous year’s payout of 7 yen, according to a statement to the Tokyo Stock Exchange.

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

To contact the editor responsible for this story: Darren Boey at dboey@bloomberg.net.

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