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Japan Stocks Rise on Expectations for Easing; Yen Weakens

Japanese stocks rose a third day, sending the Nikkei 225 (NKY) Stock Average to a four-week high, on speculation the Federal Reserve will act to support growth. The yen weakened after Japan posted a bigger-than-expected current account surplus for June, boosting exporters.

Honda Motor Co. (7267), a carmaker that gets about 80 percent of its sales abroad, gained 1.4 percent. Advantest Corp. (6857) and other chip-related companies climbed after Goldman Sachs Group Inc. boosted its outlook for the U.S. semiconductor industry. Sharp Corp. rose 2.7 percent on a Nikkei newspaper report that Hon Hai Precision Industry Co. remains committed to a partnership with the electronics maker. Pioneer Corp. (6773) plunged 7 percent after cutting its earnings forecast.

“Today’s currency movements are bolstering the Japanese market, which is a laggard compared with U.S. and Europe,” said Masaru Hamasaki, Tokyo-based chief strategist at Toyota Asset Management Co., which manages the equivalent of $23 billion. “Expectations of global monetary easing are triggering a boost in markets.”

The Nikkei 225 gained 0.9 percent to 8,881.16 at the 3 p.m. close in Tokyo, with volume 37 percent above the 30-day average. The broader Topix (TPX) Index rose 0.3 percent to 745.64. Almost three times as many shares advanced for each that fell on the gauge.

Shares pared gains after the Nikkei 225 gained as much as 5.1 percent over the past three days, headed for the biggest weekly advance this year, fueling speculation the shares had risen too far, too fast.

Easing Prospects

Futures on the Standard & Poor’s 500 Index (SPXL1) slid 0.1 percent today. The gauge rose 0.5 percent yesterday amid better-than- expected U.S. corporate earnings. More than 70 percent of the S&P 500 (SPX) companies that reported second-quarter results beat estimates, Bloomberg data show. Shares also rose after Federal Reserve Bank of Boston President Eric Rosengren said the central bank should pursue an “open-ended” easing program of “substantial magnitude.”

“Remarks about strengthening easing policies have encouraged investors to buy shares when there aren’t many catalysts to move the market,” said Toyota Asset Management’s Hamasaki.

The yen fell after Japan’s surplus in its widest measure of trade rose to 433.3 billion yen ($5.5 billion) in June, compared to 215.1 billion yen the month before, as oil prices fell to a year low. The currency weakened to as low as 78.74 against the dollar today in Tokyo, compared with 78.28 at the close of stock trading yesterday. The yen fell to 97.82 euro from 96.98. A weaker yen boosts overseas income at Japanese companies when repatriated.

Honda gained 1.4 percent to 2,535 yen. Fanuc Corp. (6954), a maker of industrial robots that earns about 75 percent of revenue overseas, advanced 1.3 percent to 12,350 yen.

Topix Rebound

The Topix rebounded 7.2 percent from this year’s low on June 4 as central banks around the world ease policy to support growth. The Bank of Japan is scheduled to start a two-day policy meeting today at which it is expected to refrain from additional monetary easing due to its view that the economy is experiencing a moderate recovery, the Nikkei reported, without citing anyone.

The price of shares on the gauge stood at 0.9 times book value, compared with 2.2 times for the S&P 500 and 1.5 times for the Europe Stoxx 600 Index. A number less than one means that companies can be bought for less than value of their assets.

Chip-related companies gained after Goldman Sachs boosted its U.S. semiconductor view to attractive from neutral, saying product supply is healthy. Advantest gained 3.2 percent to 1,047 yen. Sumco Corp. (3436), a silicon wafer maker, rose 1.5 percent to 594 yen.

Sharp Rebound

Sharp climbed 2.7 percent to 188 yen after a Nikkei newspaper report that the electronics maker and Hon Hai Precision Industry will make an announcement this week that they remain committed to a partnership, without mentioning any revision to terms of the investment after Sharp’s shares plunged last week. The report cited no sources.

A third of the Topix’s 1,672 companies are scheduled to release earnings this week. Of the 294 companies that have reported since July 1 that have issued forecasts, 51 percent have missed expectations, according to Bloomberg data.

Dainippon Screen Manufacturing Co. and Pioneer declined the most on the Nikkei 225 after cutting their outlooks on lower- than-expected sales. Dainippon Screen, a chip-equipment maker, plunged 8.9 percent to 472 yen, after cutting its net-income forecast 96 percent to 500 million yen. Pioneer sank 7 percent to 199 yen after trimming its profit projection 15 percent to 8.5 billion yen.

“Japanese corporate earnings are bad, and share gains are being driven by other markets,” said Resona Bank’s Toda. “The earnings outlook seems to indicate Japan’s economy will deteriorate toward the end of the year. The strong yen and weak demand in Asia are behind the earnings results.”

-- With assistance from Toshiro Hasegawa in Tokyo. Editor: Jim Powell

To contact the reporters on this story: Norie Kuboyama in Tokyo at nkuboyama@bloomberg.net

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

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