Japanese Stocks Advance as Yen Declines After Stimulus

Japanese stocks rose, with the Nikkei 225 Stock Average (NKY) capping its biggest monthly gain since February, as the yen dropped after nation’s cabinet approved additional stimulus ahead of next month’s election.

Nissan Motor Co. (7201), which gets 79 percent of its revenue outside Japan, reversed earlier losses to rise 0.8 percent as the yen dropped. Komatsu Ltd. (6301), Japan’s largest construction- machinery maker, rose 1.2 percent after industrial production unexpectedly advanced. Mitsubishi Heavy Industries Ltd. and Hitachi Ltd. gained after agreeing to merge their thermal-power businesses.

The Nikkei 225 Stock Average added 0.5 percent to close at 9,446.01 in Tokyo, with trading volume 25 percent above the 30- day average. The gauge has risen 0.9 percent this week and 5.8 percent this month on speculation Japan’s opposition will win the Dec. 16 election and call for more monetary easing. The broader Topix Index climbed 0.3 percent to 781.46.

“A weaker yen is giving the biggest support for shares,” said Isao Kubo, a Tokyo-based equity strategist at Nissay Asset Management Corp., which oversees about 5 trillion yen ($61 billion). “Investors are betting pressure will mount for more monetary easing. You find it hard to buy the yen ahead of the election, and the share market is sensitive to that and is being bought when the yen drops.”

The Topix traded at 0.9 times book value today, compared with 2.1 for the Standard & Poor’s 500 Index and 1.5 for the Europe Stoxx 600 Index. A number less than one means that companies can be bought for less than the value of their assets.

Second Stimulus

Japan’s cabinet approved a second round of fiscal stimulus worth 880 billion yen using budget reserves as Prime Minister Yoshihiko Noda tries to boost the economy before the election. The yen declined against all of its 16 major counterparts, lifting the earnings outlook for Japanese exporters.

Nissan gained 0.8 percent to 799 yen after falling as much as 1 percent. Canon Inc. (7751), a camera maker that gets 80 percent of its sales outside Japan, rose 1.2 percent to 2,883 yen.

Machinery makers advanced after Japan’s industrial production rose 1.8 percent in October from the previous month, the Trade Ministry said. Economists surveyed by Bloomberg had been expecting a 2 percent fall.

Komatsu advanced 1.2 percent to 1,847 yen. Hitachi Construction Machinery Co. (6305) gained 1.6 percent 1,443 yen.

Futures on the S&P 500 fell 0.2 percent today. The gauge gained 0.4 percent yesterday as Senate Majority Leader Harry Reid said Democrats were all on the same page on budget talks to stave off the fiscal cliff, automatic tax increases and spending cuts that will kick in next year unless a compromise is reached. Stocks also gained on a report U.S. gross domestic product grew at a 2.7 percent rate, beating estimates for a 2 percent rise.

Mitsubishi Heavy Merger

Mitsubishi Heavy Industries and Hitachi rose after agreeing to merge thermal-power units with combined revenue of 1.1 trillion yen. Mitsubishi Heavy gained 3 percent to 383 yen and Hitachi added 4.2 percent to 476 yen.

Mitsubishi Heavy also plans to merge its forklift operations with Nippon Yusoki Co., according to a statement to the Tokyo Stock Exchange yesterday. Nippon Yusoki surged 36 percent to 303 yen, leading gains on the Topix.

The Nikkei Stock Average Volatility Index (VNKY) fell 0.2 percent to 17.24, indicating traders expect a swing of about 4.9 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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