Japanese Shares Gain on Weaker Yen, Pension-Fund Report

Japanese shares rose, with the Topix (TPX) index climbing for a third time in four days, as the yen fell against the dollar and after a report Japan’s public-employee pension fund may increase its stock holdings.

Honda (7267) Motor Co., which gets more than 80 percent of its revenue outside Japan, rose 2 percent as the yen reversed earlier gains. Nisshin Steel Holdings Co. surged after raising its half-year profit forecast. Sony Corp. (6758) slid 4.6 percent after its board turned down activist investor Daniel Loeb’s proposal to spin off part of the entertainment business.

The Topix gained 0.8 percent to 1,193.66 at the close of trading in Tokyo, after falling as much as 1.3 percent. Volume was 17 percent below the 30-day average. The Nikkei 225 Stock Average climbed 1 percent to 14,401.06. Reuters reported today that the country’s pension fund for civil servants may sell Japanese government bonds and buy local stocks.

“The story is prompting the rally as there is very little other news around and most people are kind of expecting these moves by the pension funds as JGBs may no longer be able to match their liabilities,” said Andrew Sullivan, director of sales trading at Kim Eng Securities in Hong Kong. “The key is that other pensions are probably considering doing the same but it takes time to switch allocations.”

Share swings are increasing as investors weigh Prime Minister Shinzo Abe’s stimulus policies against concern China’s economy is slowing and prospects the U.S. will end bond-buying. The Topix moved more than 2.4 percent a day on average last week, the biggest fluctuations since June. Historical volatility over the last 90 days, a period that includes May and June when the index plunged more than 18 percent, reached almost 32 percent last week, the highest since the crisis after the 2008 collapse of Lehman Brothers, data compiled by Bloomberg show.

Record Stimulus

“The undercurrent for Japanese stocks is that the country will exit deflation and the market is still likely to advance on fundamentals,” said Toshihiko Matsuno, a strategist at Tokyo-based SMBC Friend Securities Co., a unit of Japan’s second-biggest lender by market value. “For the time being the market will be trading without much direction.”

The Topix rose 39 percent this year, making Japan the world’s best-performing developed equity market, amid optimism Abe will push through reforms while the Bank of Japan continues record stimulus. The equity gauge traded at 1.25 times book value today, compared with 2.51 for the Standard & Poor’s 500 Index and 1.69 for the Stoxx Europe 600 Index yesterday.

Profits have increased 90 percent at the 1,146 Topix companies that have reported quarterly earnings, according to data compiled by Bloomberg. Of the 203 companies on the gauge that posted results for which Bloomberg has estimates, 59 percent beat projections.

U.S. Stocks

Futures on the S&P 500 lost 0.1 percent. The equity gauge fell from a record yesterday in New York as investors weighed stronger-than-forecast growth in service industries and Fed Bank of Dallas President Richard Fisher’s comments that investors should’t rely on $85 billion in monthly bond purchases.

Stocks gained today as Japan’s currency traded at 98.57 per dollar after earlier strengthening to as much as 97.84. A weaker yen boosts exporters’ overseas earnings when repatriated.

Honda rose 2 percent to 3,795 yen, rebounding from a 1.8 percent decline as the yen weakened. Mazda Motor Corp., which gets more than 70 percent of sales outside Japan, climbed 2.4 percent to 433 yen. Canon Inc., the world’s largest camera maker, added 1.1 percent to 3,210 yen.

More Stocks

In another boost to shares, the Federation of National Public Service Personnel Mutual Aid Associations, may allow more of its $80 billion yen in assets to be invested in domestic stocks instead of JGBs, Reuters reported without saying where it got the information. The fund, which covers 1.24 million active and retired civil servants in Japan, allocates about 79 percent of its holdings to domestic bonds and 6.8 percent to local stocks, Reuters said.

Nisshin Steel jumped 16 percent to 1,059 yen, the most since May 10, for the second-biggest gain on the Topix. Japan’s fourth-largest steel producer raised its half-year profit forecast by 350 percent to 4.5 billion yen ($46 million).

Sony slid 4.6 percent to 2,039 yen, its largest decline in two months, after the board unanimously decided against an initial public offering of the entertainment business. Loeb said he was disappointed with the decision and would seek ongoing dialogue with the company. Sony also said it will begin providing additional disclosure on the unit.

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: Sarah McDonald at smcdonald23@bloomberg.net

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