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Japan Stocks Rise on China Reserve Ratio, Yen’s Decline

Feb. 20 (Bloomberg) -- Japanese shares rose for a second day after China eased lending curbs to shore up economic growth and the yen touched a six-month low against the dollar.

Hitachi Construction Machinery Co. (6305), which gets 22 percent of its sales in China, gained 4.6 percent. Sony Corp. (6758), Japan’s No. 1 exporter of consumer electronics, rose 3.6 percent. JFE Holdings Inc. (5411) led steel makers higher after Credit Suisse Group AG raised their stock price estimates. Universal Entertainment Corp. dropped 21 percent after Wynn Resorts Ltd. sold its stake in the pachinko-machine maker at a discount.

The Nikkei 225 Stock Average (NKY) rose 1.1 percent to 9,485.09 as of 3 p.m. in Tokyo, its highest close since Aug. 4. Trading volume on the gauge was 42 percent above the 100-day average. The broader Topix Index gained 1.1 percent to 819.03.

“Developing nations are following a global trend of monetary easing, which is very positive,” said Shintaro Takeuchi, portfolio investment group manager at Tokio Marine & Nichido Fire Insurance Co., which oversees $109 billion in assets. “Expectations are mounting that the yen’s upward trend is coming to an end.”

Chinese Reserve Ratios

Futures on the Standard & Poor’s 500 Index (SPXL1) rose 0.5 percent today after Prime Minister Lucas Papademos said Greece had found the additional spending cuts needed to secure a debt bailout. The gauge added 0.2 percent in New York on Feb. 17 as jobless claims, manufacturing and housing data beat estimates.

The proportion of cash that Chinese lenders must set aside will drop half a percentage point from Feb. 24, freeing up more capital for lending, the central bank said on Feb. 18. Standard Chartered Plc expects at least three more reductions this year, while HSBC Holdings Plc predicts a minimum of two.

“It’s a bold move and one aimed at maintaining growth rates, which will provide support for equity investors,” said Tim Schroeders, who helps manage $1 billion in equities at Pengana Capital Ltd. in Melbourne. “The timing is probably just ahead of China committing to European bailout funds.”

Finance Minister Jun Azumi said Japan will work with China to help Europe through the International Monetary Fund. More funding is needed to contain the debt crisis, even as Greece shows some improvement in addressing its financial woes, Azumi told reporters in Beijing yesterday after meeting Chinese Vice Premier Wang Qishan.

Machinery Stocks Advance

Hitachi Construction added 4.6 percent to 1,694 yen, and Komatsu Ltd. (6301), Japan’s largest construction machinery maker, rose 3 percent to 2,423 yen. The company counts China as its biggest market.

Exporters gained as the yen touched 79.89 against the dollar today, the lowest since Aug. 4. A weaker yen boosts overseas income at Japanese companies.

Sony advanced 3.6 percent to 1,681 yen. Toyota Motor Corp. (7203), Asia’s biggest carmaker, rose 2 percent to 3,350 yen.

Steel and iron makers rose the most among the Topix’s 33 industry groups after Credit Suisse said export prices for the material will recover as costs fall.

JFE jumped 8.4 percent to 1,712 yen. Nippon Steel Corp. (5401) gained 5.2 percent to 224 yen, while Sumitomo Metal Industries Ltd. (5405) rose 4.6 percent to 161 yen.

Shippers Gain

Nippon Yusen K.K. (9101), Japan’s biggest shipping line by sales, added 3.4 percent to 242 yen. Mitsui O.S.K. Lines Ltd. (9104), ranked No. 2, gained 5.8 percent to 368 yen. Kawasaki Kisen Kaisha Ltd. (9107), No. 3, advanced 4 percent to 184 yen.

Shipping companies advanced after Hong Kong-listed Orient Overseas International Ltd. said it will raise rates on routes from Northern Europe to Asia. Maersk Line Ltd., the world’s leading container carrier, said it will cut capacity in Asia- Europe routes to shore up profit.

Universal Entertainment slumped by its daily limit of 400 yen, or 21 percent, to 1,516 yen after casino-operator Wynn redeemed its 20 percent stake at a 31 percent discount and accused Kazuo Okada, chairman of the pachinko company, of making improper payments to Philippine regulators.

The Nikkei 225 Volatility Index rose 7.2 percent to 23.71, indicating traders expect a swing of about 6.8 percent on the benchmark gauge over the next 30 days.

To contact the reporter on this story: Yoshiaki Nohara in Tokyo at ynohara1@bloomberg.net

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

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