Japan Shares Rise on Yen as Abe Weighs Corporate-Tax Cut

Photographer: Tomohiro Ohsumi/Bloomberg

Pedestrians walk past an electronic stock board outside a securities firm in Tokyo. Close

Pedestrians walk past an electronic stock board outside a securities firm in Tokyo.

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Photographer: Tomohiro Ohsumi/Bloomberg

Pedestrians walk past an electronic stock board outside a securities firm in Tokyo.

Japanese shares rose, with the Nikkei 225 Stock Average climbing from an almost seven-week low, as the weaker yen boosted exporters and amid a report Prime Minister Shinzo Abe is considering a corporate-tax cut.

Toyota Motor Corp., Asia’s biggest carmaker, increased 2.3 percent. SoftBank Corp. jumped 6.3 percent, pacing gains among communications stocks. Sony Financial Holdings Inc. added 2.8 percent after the insurance and financial-services company boosted its dividend forecast. Komatsu Ltd. climbed 1.9 percent after Japan’s machinery orders fell less than expected.

The Topix index added 2 percent to 1,157.15 at the close of trading in Tokyo, with all 33 industry groups advancing. Volume was 30 percent lower than the 30-day average. The Nikkei 225 rose 2.6 percent to 13,867 after yesterday closing at its lowest since June 27. Japan’s currency fell 0.5 percent to 97.38 per dollar as of 3:45 p.m.

“The yen returning to the 97 level is positive and a corporate tax cut would be reflected on company earnings directly so its impact on the market would be huge,” said Toshihiko Matsuno, a strategist at Tokyo-based SMBC Friend Securities Co., a unit of Japan’s second-biggest lender by market value. “A reduction would help cover the likely dip in the economy from raising the sales tax, while also boosting companies in Japan across the board.”

The prime minister asked for a study of lower rates on businesses as a counterweight to a sales-levy increase, the Nikkei newspaper reported, citing unidentified people in the government. Japan may raise the consumption tax by three percentage points next year to rein in a national debt of more than twice gross domestic product.

‘Verbal Intervention’

“Abe’s calling for a study on cutting corporate taxes is the classic positive ‘verbal intervention’ he is becoming known for,” said Gavin Parry, managing director of Hong Kong-based brokerage Parry International Trading Ltd. “Being vocal on potential corporate-tax changes spurs expectations for further capital expenditure. The yen is also positive for stocks.”

Japan’s currency declined as much as 0.7 percent against the dollar to touch 97.56 today, compared with a high of 95.93 yesterday. Carmakers and electronics manufacturers provided the biggest boost to the Topix today, on optimism a weaker yen will boost repatriated earnings.

Toyota gained 2.3 percent to 6,330 yen, while Honda Motor Co. (7267), which gets 46 percent of sales from North America, advanced 1.9 percent to 3,795 yen. Canon Inc., the world’s biggest camera maker, climbed 1.9 percent to 3,190 yen.

Machinery Orders

Even after falling for the past three months, the Topix is still up 35 percent this year, retaining Japan’s position as the world’s best-performing developed equity market. The measure has risen amid optimism Abe will push through reforms while the Bank of Japan provides record stimulus in a bid to ignite a recovery in Asia’s second-largest economy.

June core machinery orders, an indicator of future capital spending, fell 2.7 percent on the month, the Cabinet Office said today in Tokyo. Economists surveyed by Bloomberg expected a 7 percent drop.

The Topix Machinery Index climbed 1.6 percent. Komatsu rose 1.9 percent to 2,315 yen. Hitachi Construction Machinery Co. added 2.3 percent to 2,074 yen.

Gross domestic product expanded at an annualized 2.6 percent in the second quarter, from a revised 3.8 percent gain in the previous three months, the Cabinet Office reported yesterday. The median forecast of economists surveyed by Bloomberg was for 3.6 percent growth.

Tax Debate

The GDP data will be used to decide whether to raise the sales tax. The figures appear “too low to support a smooth implementation of the consumption tax hike,” Naoki Kamiyama, an equity strategist at Bank of America Merrill Lynch in Tokyo, wrote in a note today. Growth continues to be “good,” Economy Minister Akira Amari told reporters after the release yesterday.

Paper makers climbed the most among the Topix groups today. Oji Holdings Corp., the biggest company in the sector by market value, jumped 3.4 percent to 425 yen. A gauge tracking information and communications stocks gained 3.1 percent for the second-biggest advance among the subsectors, as SoftBank jumped 6.3 percent to 6,370 yen.

Sony Financial gained 2.8 percent to 1,703 yen after announcing a plan to pay a dividend of 30 yen per share, compared with a previous plan of 25 yen a share.

Just nine companies on the Nikkei 225 declined today. Endoscope-maker Olympus Corp. (7733) led losses on the measure, falling 1.8 percent to 2,759 yen. Comsys Holdings Corp., which constructs telecommunication and electrical facilities, lost 1.3 percent to 1,186 yen for the second-biggest drop.

Retail Sales

Futures on the Standard & Poor’s 500 Index climbed 0.2 percent. The measure yesterday declined 0.1 percent, its fifth drop in six sessions, as investors awaited today’s report on U.S. retail sales for hints on when the Federal Reserve will curtail stimulus.

The Topix traded at 1.21 times book value today, compared with 2.49 for the S&P 500 and 1.72 for the Stoxx Europe 600 Index yesterday. The gauge’s 30-day historic volatility was at 25.88 today, down about 40 percent from a June high of 43.22.

To contact the reporters on this story: Anna Kitanaka in Tokyo at akitanaka@bloomberg.net; Toshiro Hasegawa in Tokyo at thasegawa6@bloomberg.net

To contact the editor responsible for this story: Sarah McDonald at smcdonald23@bloomberg.net

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