Japan Shares Rise on Yen; Volume Low Before Fed Meeting

Japanese shares rose, with the Topix (TPX) index rebounding from four weeks of losses, amid lower volume ahead of tomorrow’s Federal Reserve policy meeting. The yen weakened from its strongest against the dollar in two months.

Toyota Motor Corp. (7203), which gets 75 percent of its sales abroad, advanced 2 percent. Chiyoda Corp. surged 8 percent after Bank of America Merrill Lynch upgraded the industrial-plant maker. Japan Tobacco Inc. climbed 5 percent after saying domestic cigarette sales rose in May. Mitsubishi Estate Co. fell 2.4 percent as developers retreated the most among the Topix’s 33 industry groups.

The Topix added 2.7 percent to 1,084.72 at the close of trading in Tokyo. Volume was about 44 percent below the 30-day average ahead of the Federal Open Market Committee meeting that begins tomorrow. Only 83 shares fell on the 1,709-member gauge. The Nikkei 225 Stock Average climbed 2.7 percent to 13,033.12.

“The time for a rebound in Japanese shares is getting closer,” said Kenji Shiomura, a Tokyo-based senior strategist at Daiwa Securities Group Inc., Japan’s second-largest brokerage. “The focus is on the FOMC and expectations are that Ben Bernanke is going to say something that calms the market.”

Fed Chairman Bernanke will hold a press conference on June 19 after the two-day policy meeting. Almost $3 trillion has been erased from global markets since he said on May 22 that the central bank could begin winding back stimulus if the U.S. job market shows sustainable improvement.

While all 37 economists surveyed by Bloomberg News predict U.S. borrowing costs will be kept in a zero to 0.25 percent range, investors will be looking for signs of when the Fed will taper its bond buying.

Shares Falling

The Topix has dropped about 15 percent from its recent high on May 22. Shares have declined amid a strengthening yen, disappointment about Prime Minister Shinzo Abe’s growth strategy and concern the U.S. Fed will scale back stimulus.

The gauge traded at 1.15 times book value, compared with 2.4 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 0.6 percent. The index fell 0.6 percent on June 14 as the International Monetary Fund cut its 2014 outlook for the U.S. and urged the central bank to carefully manage its exit from stimulus. Futures on the Nikkei 225 in Osaka rose 2.3 percent today. The Topix Core 30 index of Japan’s largest stocks rose 2 percent to 578.63.

“From a technical perspective and looking at valuations, the market looks affordable,” said Shuichi Saito, general manager at Chibagin Asset Management Co. “It looks like today’s buying was fueled by individual investors. The Topix Core 30 hasn’t risen very much, which indicates foreign investors are waiting in the wings before the FOMC meeting.”

Yen Weakens

Shares gained as the yen weakened 0.6 percent to 94.94 per dollar today, after surging the most since July 2009 last week and touching 93.98 on June 14. The currency lost as much as 19 percent this year through May 17, weakening past 100 per dollar. After four weeks of advances its year-to-date fall has now been reduced to 8.6 percent.

Toyota, the world’s No. 1 carmaker, climbed 2 percent to 5,700 yen, the biggest single boost to the Topix. Bridgestone Corp., which gets about 77 percent of its revenue abroad, advanced 4.7 percent to 3,210 yen as tiremakers increased. Panasonic Corp., which derives about half of sales overseas, rose 4 percent to 747 yen.

Game Stocks

Gamemakers advanced today. Nintendo Co., the producer of the Wii console, added 9.3 percent to 10,440 yen in Osaka. Square Enix Holdings Co. (9684), developer of the Final Fantasy series, jumped 7.5 percent to 1,160 yen. DeNA Co., which operates the social-gaming site Mobage-town, climbed 6.7 percent to 2,201 yen.

Among other shares that rose, Chiyoda climbed 8 percent to 1,140 yen after Bank of America Merrill Lynch raised the stock to buy from underperform, citing prospects for shale gas projects in the U.S. Even with today’s advance, the engineering company is the worst-performing stock on the Nikkei 225 since elections were announced in mid-November that triggered a rally in Japanese shares.

Tokuyama Corp., the Japanese chemical producer buying control of a subsidiary of Switzerland’s Holcim Ltd., soared 17 percent to 331 yen for the biggest gain on the Nikkei 225. Shares in the producer of chemicals, resins and cement are up 75 percent this year, almost triple the gain for the Topix.

Cigarette Sales

Japan Tobacco jumped 5 percent to 3,455 yen today, the third-biggest boost on the Topix. May sales volume rose 0.4 percent to 10.2 billion cigarettes in Japan, the nation’s third-largest company by market value said on June 14.

Among stocks that fell, a gauge tracking real-estate shares lost the most among the Topix’s industry groups and was one of only two groups to retreat. Mitsubishi Estate Co., Japan’s largest developer by market value, lost 2.4 percent to 2,272 yen, the biggest drop on the Nikkei 225. Mitsui Fudosan Co., the largest by sales, decreased 0.6 percent to 2,731 yen. The five biggest decliners on the Nikkei 225 were all property companies.

The Topix has swung an average of about 3.5 percent daily since May 22. The gauge’s 100-day historic volatility reached 29.86 today, its highest since the 2011 earthquake and tsunami. Volatility on the Nikkei 225 fell 6 percent to 39.10, indicating traders expect a swing of about 11 percent for the measure in the next 30 days.

The Nikkei 225 and Topix are still up more than 25 percent this year, making Japan the best-performing major equity market.

To contact the reporters on this story: Anna Kitanaka in Tokyo at akitanaka@bloomberg.net; Satoshi Kawano in Tokyo at skawano1@bloomberg.net

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

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