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Japan Stocks Advance on Stimulus Hopes, U.S. Budget Talks

Japanese stocks rose, with the Topix (TPX) Index capping the biggest gain in a three-day period since March 2011, as utilities jumped on speculation elections next month will hand power to an opposition party more supportive of nuclear power and as a weaker yen buoyed exporters.

Toyota Motor Corp. added 1.4 percent as the yen touched a seventh-month low after a report opposition leader Shinzo Abe said he would choose someone in favor of inflation targets as the next central bank governor. Shikoku Electric Power Co. (9507) climbed 10 percent to lead gains among utilities. Japan Tobacco Inc. (2914) jumped 6.5 percent as a finance ministry official said the government will postpone selling a stake in the company.

The Topix rose 1.4 percent to close at 762.16 in Tokyo, with almost six shares advancing for each that fell. The index has risen 5.5 percent in the three days since the ruling party called for elections that polls suggest the opposition Liberal Democratic Party will win. The Nikkei 225 Stock Average (NKY) gained 1.4 percent to 9,153.20 today.

“Every yen the currency depreciates has a big impact on earnings,” said Masaru Hamasaki, Tokyo-based chief strategist at Toyota Asset Management Co., which manages the equivalent of $22 billion. “The LDP is calling for stimulus measures and they are expected to win.”

The Topix has fallen 18 percent since the Democratic Party of Japan took power on Sept. 16, 2009, compared with a 27 percent advance for Standard & Poor’s 500 Index. Shares on the Japanese gauge trade at 0.9 times book value, while those on the S&P 500 are valued at 2.1. A number below one means companies can be bought for less than the value of their assets.

Fiscal Cliff

Futures on the S&P 500 added 0.2 percent today. The measure added 0.5 percent on Nov. 16 after U.S. House Speaker John Boehner said talks over the so-called fiscal cliff were “constructive.” President Barack Obama told reporters in Bangkok yesterday that he’s “confident we can get our fiscal situation dealt with.”

The S&P 500 has lost almost 5 percent since the Nov. 6 election set up a budget showdown between Obama and the Republican-controlled House. The gauge has dropped so far that it would have to advance 26 percent to reach the valuation of bull markets since John F. Kennedy was in the White House.

Abe, the former prime minister who leads the LDP, said he will choose someone who is in favor of inflation targets as the next BOJ Governor, Kyodo news reported Nov. 17. The central bank should be responsible for sustaining employment like the U.S. Federal Reserve, Abe said according to the report.

Inflation Target

Japan’s currency fell to the lowest level in almost seven months ahead of a Bank of Japan policy decision tomorrow. All 21 economists surveyed by Bloomberg said they expect BOJ Governor Masaaki Shirakawa’s board to take no action at this meeting.

Exporters gained after the yen depreciated to as low as 81.59 per dollar, the weakest since April 25. Against the euro, Japan’s currency weakened to 104.11 from 103.43 at the close of stock trading on Nov. 16. A weaker yen boosts overseas income at Japanese companies when repatriated.

Toyota Motor rose 1.4 percent to 3,370 yen. Nikon Corp., a camera maker that gets about 85 percent of its sales overseas, jumped 4.7 percent to 2,080 yen.

Utilities advanced for a third day, gaining the most today among the Topix’s 33 industry groups. Shikoku Electric jumped 10 percent to 1,076 yen. Kansai Electric Power Co. gained 5.5 percent to 744 yen.

Utilities Surge

The Topix gauge tracking power companies has risen 9.8 percent in the three days after the Dec. 16 elections were called. Polls show the LDP, which promoted Japan’s atomic industry during most of its five decades in power, will win.

Oil companies gained after crude for January delivery rose to as high as $87.68 a barrel in electronic trading on the New York Mercantile Exchange. JX Holdings Inc., owner of Japan’s biggest refiner, jumped 4.9 percent to 426 yen. Idemitsu Kosan Co. climbed 3 percent to 6,960 yen.

Japan Tobacco gained the most in the Nikkei 225, rising 6.5 percent to 2,411 yen after a finance ministry official said the government will postpone a planned sale of part of its stake in the tobacco maker. Separately, Japan Tobacco said in a statement that it will acquire Egypt waterpipe tobacco maker Al Nakhla.

To contact the reporter 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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