Topix Rebounds From Biggest Decline in 10 Months on Yen

Japanese shares gained, with the Topix Index (TPX) rebounding from the biggest drop in 10 months on speculation yesterday’s decline was excessive. Exporters and shippers climbed after the yen weakened.

Toyota Motor Corp., the world’s biggest carmaker, rose 1.9 percent. Kawasaki Kisen Kaisha Ltd. (9107), Japan’s third-largest shipping company by market value, rose 3.2 percent, paring yesterday’s 4.8 percent drop. Daiei Inc. (8263) tumbled 5.7 percent after surging 34 percent yesterday on a report retailer Aeon Co. may buy a stake in the department-store operator.

The Topix gained 1.7 percent to 1,045.89 at the close in Tokyo after yesterday dropping the most since May as a plan to tax Cyprus deposit holders to fund a bailout sparked concern of bank runs in the euro zone. The Nikkei 225 Stock Average rose 2 percent to 12,468.23. Volume was 36 percent below the 30-day average as Haruhi Kuroda prepares to replace Bank of Japan Governor Masaaki Shirakawa tomorrow.

“There was general panic in response to the Cypriot deal yesterday but now, after some reassessment, markets are realizing it’s a special case and so the risk of contagion is low,” said Nader Naeimi, Sydney-based head of dynamic asset allocation at AMP Capital Investors Ltd., which manages $126 billion and is overweight on Japan equities. “While the BOJ leadership change has been priced into stocks in the short-term, there’s much better to come if the push to end deflation gathers momentum.”

Topix Rally

The Topix rallied 45 percent from Nov. 14, when elections were announced that brought Prime Minister Shinzo Abe to power on a platform of increased stimulus and monetary easing from the central bank. The gauge is trading at 1.2 times book value, compared with 2.2 times for the Standard & Poor’s 500 Index and 1.6 for the Stoxx Europe 600 Index, according to data compiled by Bloomberg.

Futures on the S&P 500 climbed 0.1 percent today. The measure lost 0.6 percent yesterday after Europe’s finance ministers told Cyprus to raise 5.8 billion euros ($7.5 billion) from bank deposits to unlock emergency rescue loans. CNBC reported today the nation’s parliament won’t approve the levy.

A change of leadership at the Bank of Japan (8301) takes effect tomorrow amid expectations for further policy easing. Incoming Governor Haruhiko Kuroda has pledged to do whatever is needed to end 15 years of deflation, and expressed confidence a 2 percent inflation target is achievable.

Goldman Sachs Group Inc. boosted its 12-month target for the Topix to 1,250, the investment bank last raised its outlook for the index to 1,100 in January.

Yen Weakens

The yen declined versus all 16 major peers today, falling to 95.75 against the dollar from as strong as 93.57 yesterday.

Toyota rose 1.9 percent to 4,940 yen, the biggest boost to the Topix. Honda Motor Co., which gets most of its revenue outside of Japan, gained 2.4 percent to 3,780 yen. Sony Corp., the nation’s No. 1 exporter of consumer electronics, jumped 6.8 percent, reversing all of yesterday’s decline.

Shipping companies led the advance on the Topix today, gaining the most among the gauge’s 33 industry groups and reversing yesterday’s decline.

Kawasaki Kisen increased 3.2 percent. Nippon Yusen (9101) K.K., Japan’s biggest shipping line, jumped 4.3 percent after dropping 4.2 percent yesterday. Daiichi Chuo K.K., which delivers crude oil to Japan, surged 19 percent to lead gains in the sector.

Shipping Rates

Charter rates for the largest oil tankers on the benchmark Saudi Arabia-to-Japan voyage rose 1.4 percent to 34.81 industry- standard Worldscale points, data from the London-based Baltic Exchange showed yesterday. The Baltic Dry Index (BDIY), a measure of commodity shipping costs, gained for 14 straight days through yesterday to reach its highest this year.

Taiyo Yuden Co. surged 8.2 percent to 1,236 yen, its highest since March 2011 and the biggest gain today on the Nikkei 225. CLSA Asia Pacific Markets boosted its rating on the component-maker’s shares, following upgrades from Mizuho Financial Group Inc. and Jefferies Group LLC this month after the company forecast a return to profit.

Among shares that fell, Daiei slumped 5.7 percent after it rose by its daily trading limit yesterday, surging the most since 2003. Aeon is considering buying about 10 billion yen, or 29 percent, of the department-store operator, the Yomiuri newspaper said yesterday. Daiei denied the report.

The Nikkei Stock Average Volatility Index (VNKY) fell 7.4 percent to 24.19 today, indicating traders expect a swing of about 6.9 percent on the benchmark gauge over the next 30 days.

To contact the reporter on this story: Anna Kitanaka in Tokyo at akitanaka@bloomberg.net

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

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