Topix Extends 4 1/2-Year High as G-7 Tolerates Yen Slide

Japanese stocks rose, with the Topix Index extending a 4 1/2-year high, as the yen weakened past 102 against the dollar after the Group of Seven signaled tolerance for the currency’s drop. Nissan (7201) Motor Co. and Panasonic (6752) Corp. jumped after posting earnings.

Brokerages rose the most among the 33 Topix industry groups, with Nomura Holdings Inc. surging 9.6 percent. Nissan added 4.5 percent after the automaker forecast net-income to grow 23 percent based on an assumption the yen will trade at 95 to the dollar. Panasonic gained 7.6 percent after the electronics maker topped estimates for operating profit. Sharp Corp. climbed 12 percent after the Nikkei newspaper reported the money-losing TV maker plans to pare its European operations.

The Topix advanced 1.8 percent to close at 1,232.20 in Tokyo, the highest close since Aug. 29, 2008. More than nine stocks gained for every seven that fell. The Nikkei 225 Stock Average (NKY) added 1.2 percent to 14,782.21, with volume 42 percent above the 30-day average.

“G-7 has given a nod to Japan’s measures to beat deflation,” said Kuninobu Takeuchi, Tokyo-based executive portfolio manager at DIAM Co, which oversees the equivalent of about $98 billion. “Exiting deflation means growth, enabling companies to expand. Companies tend to put forward conservative profit forecasts, say a 30-40 percent increase, while the market is pricing growth of 40-50 percent.”

The Topix and the Nikkei have been the top-performing major equity gauges since mid-November, advancing more than 70 percent amid unprecedented monetary easing from the Bank of Japan and calls from Prime Minister Shinzo Abe to end deflation.

Brokerages Rally

The Topix Securities Index jumped 7.6 percent on optimism brokerages (TPX) will benefit from a surge in trading volume. The gauge has gained the most among the Topix’s industry groups this year, almost doubling. An average of 3.7 trillion shares have changed hands each day on the Topix in 2013, compared with 2 trillion a year earlier.

Nomura, Japan’s biggest brokerage, jumped 9.6 percent to 934 yen today, the highest since November 2008. Daiwa Securities Group Inc. (8601), the No. 2, rose 8.3 percent to 1,002 yen today. Both brokerages have more than tripled since the rally started in mid-November.

Of the 649 companies on the Topix that have reported full-year earnings since April 1, and for which Bloomberg has estimates, 393 beat analysts’ projections. Dentsu Inc. and Kajima Corp. are among more than 300 companies on the 1,711-member Topix scheduled to report results this week.

G-7 policy makers meeting near London over the weekend signaled acceptance of the yen’s decline through 100 per dollar, while saying they will monitor the effect of Japan’s policies on currencies. The yen has fallen 15 percent against the dollar this year as BOJ Governor Haruhiko Kuroda pledged to double the amount of money in circulation.

Yen, Exporters

Exporters gained, with Toyota Motor Corp. (7203) rising 3.8 percent to 6,280 yen. Sony Corp. added 3.8 percent to 1,855 yen. Canon Inc. climbed 2 percent to 3,625 yen.

Nissan increased 4.5 percent to 1,111 yen after forecasting net income will rise to 420 billion yen this fiscal year. Profit rose less than 1 percent in the 12 months through March, the least among Japan’s automakers as Chinese consumers shunned Japanese products over a political dispute. Nissan outsells all Japanese automakers on the mainland.

Panasonic advanced 7.6 percent to 806 yen after saying operating profit will rise 55 percent to 250 billion yen, exceeding an estimate of 241.5 billion yen. The projection was based on an exchange rate of 85 yen per dollar. Declines in the yen may add as much as 30 billion yen to earnings this year, according to Credit Suisse Group AG analyst Shunsuke Tsuchiya.

Sharp Downsizing

Sharp jumped 12 percent to 506 yen after the Nikkei said the company may sell a Polish TV factory and scale back output at a British solar module plant. Sharp reached an agreement to sell its Malaysian TV plant to Wistron Corp. in Taiwan, Kyodo news reported on May 11.

Among other stocks that advanced, Kubota Corp. (6326) jumped 17 percent to 1,671 yen, the highest since at least 1974, after the maker of farm tractors forecast annual profit of 100 billion yen year. Analysts projected 89.5 billion yen.

Futures on the Standard & Poor’s 500 Index slid 0.3 percent today after the measure climbed 0.4 percent to a record high at the end of last week.

The Nikkei Stock Average Volatility Index gained 3.8 percent to 27.07, indicating traders expect a swing of about 7.8 percent on the benchmark gauge during 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: John McCluskey at j.mccluskey@bloomberg.net

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