Topix Rises to Highest Since 2010 on BOJ Easing Optimism

Japanese stocks rose, with the Topix Index (TPX) closing at its highest since 2010, after a drop in consumer prices added pressure on the Bank of Japan (8301) to heed Prime Minister Shinzo Abe’s call to curb deflation. Property companies and utilities advanced.

Mitsubishi Estate Co. (8802) added 6.1 percent to pace gains among developers on expectations for more easing. Tokyo Electric Power Co. led utilities higher after Abe yesterday said the government will restart nuclear plants once safety is assured. Hitachi Construction Machinery Co. (6305), a Japanese machinery maker that gets 17 percent of its sales in China, dropped 2.1 percent after data showed the pace of mainland manufacturing growth unexpectedly slowed.

The Topix rose 0.9 percent to 984.33 in Tokyo, its highest close since April 30, 2010. The equity gauge gained 2.2 percent on the week. The Nikkei 225 Stock Average (NKY) rose 0.4 percent to 11,606.38 after completing a seven-month advance yesterday. Trading volume was 27 percent below the 30-day average.

“Deflation is so entrenched and that’s why expectations are high for the BOJ,” said Isao Kubo, a Tokyo-based equity strategist at Nissay Asset Management Corp., which oversees about 5 trillion yen ($54 billion.) “They have to make bold moves to revive the economy if they really want to see inflation.”

The Topix surged 36 percent from Nov. 14 as a new government came to power, with Abe yesterday nominating a proponent of stimulus to lead the BOJ. The measure is trading at 1.2 times book value, compared with 2.1 for the Standard & Poor’s 500 Index and 1.5 for the Stoxx Europe 600 Index.

BOJ Outlook

Japan’s consumer prices excluding fresh food fell 0.2 percent in January from a year earlier, the third straight decline, the statistics bureau said today. If confirmed by parliament, Asian Development Bank President Haruhiko Kuroda will replace BOJ Governor Masaaki Shirakawa.

Analysts at banks from Nomura Holdings Inc. to Mizuho Securities Co. say more easing may be coming as soon as the central bank convenes April 3, its first meeting after the sitting governor retires on March 19.

Developers gained on expectations for more stimulus. Mitsubishi Estate gained 6.1 percent to 2,450 yen. Hoosiers Corp., which designs and markets condominiums, jumped 9.2 percent to 84,700 yen.

Utilities gained after Abe’s remarks on restarting nuclear reactors. The premier also said the government will reduce reliance on nuclear power, pursuing energy-saving efforts and maximizing the use of renewable energy.

Tokyo Electric added 2.9 percent to 216 yen. Shikoku Electric Power Co. gained 2.1 percent to 1,159 yen.

U.S. Stocks

Futures on the S&P 500 Index (SPX) slid 0.1 percent today. The U.S. equity gauge dropped 0.1 percent yesterday as MSCI Inc. made changes to global and U.S. equity indexes at the close of trading, a process known as rebalancing that can lead to swings in affected stocks. Gains also narrowed after the Senate rejected proposals to replace $85 billion in automatic spending cuts set to begin tomorrow.

A Chinese manufacturing index slowed a second month after a gauge of new orders declined, a signal the nation’s economic recovery may be losing steam. The Purchasing Managers’ Index was 50.1 in February, the government reported today, missing estimates of 50.5. A reading above 50 indicates growth.

Hitachi Construction dropped 2.1 percent 2,085 yen. TDK Corp. (6762), a maker of electronic components that gets 27 percent of its revenue in China, fell 0.8 percent to 3,175 yen.

The Nikkei Stock Average Volatility Index (VNKY) fell 4.6 percent to 26.51, indicating traders expect a swing of about 7.6 percent of 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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