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Japan’s Topix Extends Longest Win Streak in Year on Yen

Japanese shares gained, with the Topix Index posting its longest winning streak in more than a year, after the yen neared 100 to the dollar and the Bank of Japan (8301) pledged again to do what’s needed to reach an inflation goal within two years.

Canon Inc. (7751), the world’s biggest camera maker, gained 4.2 percent to its highest level in a year. Nomura Holdings Inc., Japan’s biggest brokerage, jumped 8.3 percent. Sharp Corp., which makes Aquos televisions, gained 7.9 percent after the Nikkei newspaper reported second-half operating profit will beat forecasts. Auto-parts supplier Takata Corp. tumbled 9 percent after Japan’s three biggest automakers said it is recalling vehicles because of airbags made by the safety equipment maker.

The Topix rose 2.3 percent to 1,147.29 at the close of trading in Tokyo, its highest level since September 2008. The measure today capped a 16 percent gain over seven days, its best such performance since March 2009 and its longest winning streak since January last year.

“The odds are clearly stacked in favor of a continued rally in Japan,” said Mikio Kumada, Hong Kong-based global strategist for LGT Capital Management, which oversees more than $25 billion. The BOJ “has essentially scrapped existing rules and programs, replacing them with straightforward and expanded open-market purchases. This bold economic-policy shift has the potential to sustain the rebound.”

The Nikkei 225 Stock Average rose 2 percent to 13,549.16, with volume on the measure 55 percent above its 30-day average at the close.

The Topix (TPX) surged 55 percent from mid-November through yesterday as Prime Minister Shinzo Abe and central bank Governor Haruhiko Kuroda pledged to defeat 15 years of deflation. The gauge traded at 1.3 times book value compared with 2.4 for the Standard & Poor’s 500 Index and 1.6 for the Stoxx Europe 600 Index, according to data compiled by Bloomberg.

Inflation Target

The Topix has risen every day since April 3, when the BOJ began a meeting that ended with the announcement that the bank will will double the monetary base by the end of 2014 by buying government bonds, its boldest round of quantitative easing. Kuroda said yesterday that the stimulus announced last week is enough to achieve a 2 percent inflation goal.

The yen traded at 99.71 per dollar, near the 100 yen level last seen in April 2009. The currency has dropped about 6.9 percent this month, the worst performance among 10 developed- nation currencies tracked by Bloomberg Correlation Weighted Indexes. A weaker yen boosts overseas earnings for Japanese exporters when repatriated.

Actual Action

“Finally we have aggressive policy action -- not just talk,” wrote UBS AG strategists led by Niall MacLeod in a report yesterday. “For now, the impact is likely to keep the yen on a downward path.”

Tire makers, brokerages and insurers led gains among the Topix industry groups today, while sectors such as automakers and consumer electronics exporters exerted the biggest boost.

Canon, which gets nearly 80 percent of its revenue from outside Japan, jumped 4.2 percent to 3,695 yen, its highest level since April 2012. Nomura (8604), up 167 percent since Nov. 14, jumped 8.3 percent to 760 yen, its highest level since January 2010. Dai-ichi Life Insurance Co., Japan’s No.3 insurer by market value, rose 5.4 percent to 128,300 yen.

Sharp jumped 7.9 percent to 313 yen, with trading volume about 39 percent higher than its 30-day average. Sharp’s operating profit for the six months through March is about 20 billion yen, beating its 13.8 billion yen forecast, the Nikkei reported, without citing anybody.

Technical Momentum

The Topix’s 14-day Relative Strength Index is now at 75.4, after crossing above 70 yesterday, a threshold that some traders view as a signal the gauge is overbought. The last time the Topix’s RSI traded above 70 was on March 15. The gauge fell 2.2 percent the following trading day.

The Topix Oil & Coal Index dropped the most among the Topix industry groups today, its first decline in seven days. The Topix Warehousing and Harbor Transportation Services Index, which includes warehouse operator Mitsubishi Logistics Corp. and port-harbor transport services company Kamigumi Co., fell the second most, extending declines after reaching its highest since 2007 on April 8.

Among other stocks that fell, autoparts supplier Takata (7312), which makes safety equipment such as seatbelts and child seats, tumbled 9 percent to 1,819 yen, paring a drop of as much as 15 percent. Japan’s biggest carmakers, Toyota Motor Corp., Honda Motor Co. and Nissan Motor Co., said they are recalling almost 3 million cars worldwide because of defects in airbags made by Takata.

The Nikkei Stock Average Volatility Index (VNKY) gained 1.5 percent to 28.86 today, indicating traders expect a swing of about 8.3 percent on the benchmark gauge over the next 30 days.

To contact the reporters on this story: Anna Kitanaka in Tokyo at akitanaka@bloomberg.net; Adam Haigh in Sydney at ahaigh1@bloomberg.net

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

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