Japanese stocks rose, with the Topix (TPX) index capping the biggest four-day rally since April, as the yen weakened after U.S. manufacturing expanded more than expected. Tokyo Electric (9501) Power Co. surged by its daily limit.
Toyota Motor Corp. (7203), a carmaker that gets 31 percent of sales in North America, increased 2.8 percent. Tokyo Electric, the utility at the center of the 2011 nuclear disaster, jumped 19 percent on a report it will apply to restart reactors. Power producers led gains as all 33 Topix subsectors climbed. Sharp Corp., an unprofitable TV maker, soared 10 percent.
The Topix increased 1.8 percent to 1,171.84 at the close in Tokyo, with volume 22 percent below the 30-day average. The gauge climbed 9.6 percent over the past four trading days, the most since April 8. The Nikkei 225 Stock Average added 1.8 percent to 14,098.74.
“Earnings at Japanese companies are likely to beat estimates because their yen forecasts are pretty conservative,” said Kuninobu Takeuchi, Tokyo-based executive portfolio manager at DIAM Co., which oversees more than $124 billion globally. “The yen comes under selling pressure when risk sentiment improves globally.”
Today’s advance pares the Topix’s losses from an almost five-year high on May 22 to 8.2 percent. The gauge is up 36 percent this year amid optimism Japan may beat deflation and achieve sustainable growth.
Investors using borrowed money to trade Japanese stocks are the most bullish since 2000, signaling expectations the rally will continue. The number of Japanese shares bought through margin accounts that profit when stocks rise outnumbered those that make money during declines by about 7 to 1, the highest for 13 years, data compiled by Bloomberg show.
Futures on the Standard & Poor’s 500 Index rose 0.4 percent, after the gauge climbed 0.5 percent yesterday. The Institute for Supply Management’s manufacturing index increased to 50.9 in June from 49 in May, beating the 50.5 forecast in a Bloomberg survey. A reading above 50 signals expansion.
The yen touched 99.91 per dollar today, the weakest since June 5. A falling yen boosts the value of overseas earnings at Japanese companies when repatriated.
Companies in the Bank of Japan’s Tankan survey, which was released yesterday, forecast the yen to average 91.20 per dollar in the fiscal year ending March 2014, compared with a projection of 85.22 in the previous report.
Makers of cars and electric appliances provided the most support to the Topix. Toyota added 2.8 percent to 6,230 yen. Mazda Motor Corp. (7261), a carmaker that gets 73 percent of its revenue abroad, gained 4.4 percent to 428 yen. Canon Inc. (7751), the world’s biggest camera maker, advanced 3.7 percent to 3,360 yen. Sony Corp. (6758), which gets 68 percent of sales overseas, climbed 2.5 percent to 2,186 yen.
Tokyo Electric, also known as Tepco, jumped 19 percent to 623 yen for the biggest gain on the Nikkei 225. Japan’s public broadcaster NHK said the utility will apply to restart reactors at its Kashiwazaki-Kariwa nuclear plant. Tepco said it would make the application in a statement after the market closed.
Sharp soared 10 percent to 436 yen for the second-biggest gain on the Nikkei 225. The company said it is considering building a 38-megawatt solar power station in Hokkaido.
Fast Retailing Co. (9983) gained 4.1 percent to 35,300 yen. After the market closed, Asia’s biggest apparel maker reported June same-store sales at Uniqlo Japan outlets increased 20.5 percent from a year ago.
Also after the close, Japan’s Government Pension Investment Fund, the world’s largest manager of retirement savings, said it posted a record 10.2 percent annual return as stocks surged and a weaker yen boosted the value of overseas assets.
The Topix will rise to 1,270 by year-end, according to 18 analysts surveyed by Bloomberg News. It’s the first time the median estimate has fallen since the rally in Japanese equities began in mid-November.
The gauge has swung an average of about 3 percent daily since May 22. The measure’s 30-day historic volatility closed at 43.22, its highest since the 2011 earthquake. The Topix traded at 14.8 times average estimated earnings, compared with 14.7 for the S&P 500 and 12.8 for the Stoxx Europe 600 Index.
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