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Japan Shares Climb Before Bernanke Testimony as Yen Drops

Japanese shares rose, with the Topix (TPX) index climbing for a third day, as the yen weakened against the dollar and investors awaited testimony by Federal Reserve Chairman Ben S. Bernanke starting today.

Mitsubishi Motors Corp. (7211) surged 11 percent after the Nikkei newspaper said the automaker will pay a dividend for the first time in 16 years. NEC Corp. advanced 4.8 percent on a report the electronics manufacturer may exit its smartphone business. Carmaker Toyota Motor Corp. reversed earlier losses to close 0.6 percent higher as the yen weakened. Furuno Electric Co., which makes sonar and radar equipment, tumbled 9.8 percent after cutting its profit forecast.

The Topix added 0.2 percent to 1,213.24 at the close of trading in Tokyo, after swinging between gains and losses in the afternoon. The Nikkei 225 Stock Average rose 0.1 percent to 14,615.04. The Standard & Poor’s 500 Index declined yesterday as Coca-Cola Co.’s profit dropped and Fed Bank of Kansas City President Esther George called for stimulus cuts.

“We’re now waiting for what Bernanke is going to say, and for him to answer what would warrant cuts to stimulus,” said Ayako Sera, a strategist at Sumitomo Mitsui Trust Bank Ltd., which manages the equivalent of $163 billion in corporate pensions. “Investors are now looking for a catalyst for further gains.”

Economic Reforms

After plunging as much as 18 percent from a May 22 high, the Topix has rebounded amid optimism Prime Minister Shinzo Abe will push through economic reforms following elections on July 21. The gauge added 14 percent in the past four weeks, the biggest such advance since April 2009.

Futures on the S&P 500 were little changed today. Bernanke is scheduled to deliver his semi-annual monetary policy report to Congress this week, starting today at the House Financial Services Committee. The Fed chairman has said any reduction in stimulus will be tied to sustained improvement in the labor market or an increase in the rate of inflation.

Japan’s currency weakened 0.3 percent to 99.37 per dollar today, after climbing 0.8 percent yesterday. The yen is the worst-performing major currency since mid-November.

Toyota, which counts North America as its biggest market for sales, rose 0.6 percent to 6,500 yen, the second-biggest boost to the Topix. Honda Motor Co., which gets 83 percent of sales outside of Japan, climbed 0.9 percent to 3,845 yen. Panasonic Corp., the maker of Viera televisions, added 2.7 percent to 881 yen.

Great Expectations

There are “big expectations” for corporate earnings, Sumitomo Mitsui Trust’s Sera said. “Especially within the exporter sector, expectations are quite high. However, we want to keep an eye on which companies benefit from a weaker yen and which ones have a negative impact.”

Earnings at Topix companies will surge 95 percent to 22.70 yen per share, compared with 11.67 yen per share last quarter, according to analyst estimates compiled by Bloomberg. Earnings are projected to grow 56 percent for the year, the data show. Quarterly profits on the Standard & Poor’s 500 Index are projected to rise 5.9 percent, according to Bloomberg data.

Among other stocks that rose, Mitsubishi Motors jumped 11 percent to 160 yen. The automaker will pay out 30 to 40 percent of its profit to shareholders in dividends this fiscal year, the Nikkei newspaper reported, without citing anyone. The carmaker is projecting net income of 50 billion yen and annual dividends are likely to exceed 10 yen per share, Nikkei said. Mitsubishi Motors is not the source of the report, it said.

Nintendo Co. (7974) jumped 6.5 percent to 13,540 yen, its highest level since July 2011, after Mizuho Financial Group Inc. raised its price target for the maker of video-game consoles. Sales of new software titles will increase later this year, Mizuho said.

NEC Jumps

NEC climbed 4.8 percent to 242 yen, its biggest gain since June 28. The company plans to close its smartphone operations, the Nikkei reported without citing anyone. The mobile-phone unit has liabilities exceeding assets by about 60 billion yen, the newspaper said. NEC said it’s not the source of the report.

Among stocks that fell, Furuno Electric tumbled 9.8 percent to 749 yen, its biggest decline since March 2011. The Hyogo, western Japan-based company cut its half-year net-income forecast by 64 percent after posting a quarterly loss of 407 million yen.

The Topix traded at 1.29 times book value today, compared with 2.47 for the S&P 500 and 1.66 for the Stoxx Europe 600 Index yesterday. The gauge’s 30-day historic volatility was at 30.55 today, retreating from its July 2 high of 43.22.

To contact the reporters on this story: Anna Kitanaka in Tokyo at akitanaka@bloomberg.net; Masahiro Watanabe in Tokyo at mwatanabe47@bloomberg.net

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

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