Japan Stocks Advance Ahead of BOJ Meeting: Canon Declines

April 25 (Bloomberg) --Japanese shares rose, with the Nikkei 225 (NKY) Stock Average advancing for a second day to its highest since 2008, before a Bank of Japan (8301) meeting. Canon Inc. (7751) and Nintendo Co. fell on disappointing earnings.

Mitsubishi UFJ Financial Group Inc., Japan’s biggest lender, advanced 2.2 percent. Nippon Electric Glass Co. jumped 7.1 percent after industry bellwether Corning Inc. forecast growth for a product used in smartphones. Canon tumbled the most on the Nikkei 225 after projecting net income lower than analyst estimates on slumping demand for compact cameras. Nintendo lost 5.9 percent after the world’s biggest maker of video-game consoles posted profit that missed analyst estimates.

The Nikkei 225 gained 0.6 percent to close at 13,926.08 in Tokyo. Volume on the measure was about 15 percent above than the 30-day average. The Topix Index (TPX) rose 0.7 percent to 1,172.78, with twice the number of stocks gaining as falling on the 1,698- member gauge.

“A weaker yen is helping Japanese companies, but you need to look at each stock to figure out if the yen’s drop is coming on top of a company’s solid business,” said Toshihiko Matsuno, a strategist at Tokyo-based SMBC Friend Securities Co., a unit of Sumitomo Mitsui Financial Group Inc., Japan’s second-biggest lender by market value.

The Topix advanced 62 percent since mid-November as Prime Minister Shinzo Abe and central bank Governor Haruhiko Kuroda pledged to defeat 15 years of deflation. The gauge trades at 1.3 times book value compared with 2.3 for the Standard & Poor’s 500 Index and 1.6 for the Stoxx Europe 600 Index, according to data compiled by Bloomberg.

Inflation Outlook

The central bank may upgrade its view on price gains excluding fresh food to at least 1.5 percent from 0.9 percent for fiscal 2014 in its next forecast update tomorrow, people familiar with the central bank’s discussions said.

Japan’s three biggest banks, Mitsubishi UFJ, Sumitomo Mitsui Financial Group Inc. and Mizuho Financial Group Inc. were among the biggest boosts to the Topix. BNP Paribas SA raised its outlook on the Japanese banking sector to “improving,” citing gains in sales of equity holdings as stocks rally.

The Topix sub-group tracking banks advanced 2.3 percent, the third-biggest gain among the gauge’s 33 industry groups.

Nippon Electric Glass, Japan’s second-biggest glassmaker by market value, jumped 7.1 percent to 525. U.S.-based Corning, a leading maker of glass for flat-panel televisions, phones and tablets, forecast growth in its telecommunications products as it benefits from surging sales of smartphones and tablets.

Honda Motor Co. and Nomura Holdings Inc. are among more than 100 companies on the Topix due to report earnings tomorrow, according to data compiled by Bloomberg. Of the 233 companies that have posted results so far this month and for which Bloomberg has estimates, 47 percent have missed projections, while 44 beat them, the data show.

Canon and Nintendo were the two biggest drags on the Topix, countering gains by Toyota Motor Corp. Of the 233 companies that have posted results so far this month and for which Bloomberg has estimates, 47 percent have missed projections, while 44 beat them, the data show.

Smartphone Pressure

Canon dropped 6.4 percent to 3,595 yen, its biggest drop since July, after forecasting net income of 290 billion yen ($2.9 billion) in 2013, missing the 308 billion-yen average of 20 analyst estimates compiled by Bloomberg. Canon cut its sales target for compact cameras because consumers increasingly use smartphones to snap pictures.

Nintendo slumped 5.9 percent to 11,240 yen, its biggest drop since September 2011 after the game maker reported its second straight operating loss as it sold less than its 4 million-unit sales target for Wii U consoles.

Foreigners, which account for about 55 percent of volume traded on the Tokyo Stock Exchange, were net sellers of Japanese stocks in the week ended April 19, just the second time overseas investors sold more than they bought since mid-November. The Topix sank 1.9 percent last week, and is headed for a 3.5 percent gain this week.

“Foreign capital is likely to keep flowing into Japanese stocks on optimism the market will keep rising,” said Mitsushige Akino, chief fund manager at Ichiyoshi Asset Management Co. in Tokyo. “It’s unlikely earnings will boost the whole market because they’re mostly in-line with expectations.”

The Nikkei Stock Average Volatility Index gained 0.6 percent to 25.79 today, indicating traders expect a swing of about 7.4 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; 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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