Japan Shares Rise While BOJ Meets as Shippers Lead Gains

Japanese shares rose amid the start of the Bank of Japan’s two-day policy meeting as shippers led gains and investors weighed a proposal to cut the nation’s corporate-tax rate.

Mitsui O.S.K. Lines Ltd. (9104), Japan’s No. 2 shipping line, climbed 2.8 percent after Nomura Holdings Inc. raised its rating on the shares, saying it is most bullish on the sector among all transport stocks. Alps Electric Co. (6770) led gains on the Nikkei 225 Stock Average after Goldman Sachs Group Inc. upgraded the computer-parts maker’s shares. ANA Holdings Inc., Asia’s biggest airline, sank 2.6 percent as Bank of America Corp.’s Merrill Lynch unit cut its rating to underperform.

The Topix index added 0.2 percent to 1,295.95 at the close of trading in Tokyo, with about equal numbers of shares rising and falling. The Nikkei 225 increased 1 percent to 15,795.96. The Japanese currency slid 0.3 percent to 104.51 per dollar.

“There’s an expectation that the BOJ will expand monetary stimulus within the year,” said Nobuyuki Fujimoto, senior market analyst at SBI Securities Co., Japan’s biggest online brokerage. “They’ll probably give some indication of their direction or how they’ll respond if the economy goes bad.”

Japan should quickly consider a reduction in the corporate tax rate to about 25 percent from the current level of about 35 percent, to bring it in line with neighboring Asian nations, according to a document submitted to Japan’s fiscal and economic policy council by its four non-government members.

Finance Minister Taro Aso said a 10 percent cut would cause a loss of about 5 trillion yen in tax revenue, based on data from the fiscal 2014 budget, according to a separate document submitted to the council. Other revenue sources would be needed to make up for a reduction of that size, he also said.

Further Stimulus

The Topix jumped 51 percent in 2013, its third-biggest yearly gain on record, as Prime Minister Shinzo Abe and Bank of Japan Governor Haruhiko Kuroda took steps to end 15 years of deflation. Strategists surveyed by Bloomberg expect the gauge will climb to 1,470 by the end of 2014 as the yen weakens amid prospects for further stimulus by the BOJ while the Federal Reserve cuts back.

“Some are saying the BOJ and the prime minister have to push the yen to 110 or more to the dollar, and that they will if required. Abe has to push ahead with reforms or lose credibility, and the company tax-cut news is positive.” said Stuart Beavis, head of institutional equity derivatives at Vantage Capital Markets in Hong Kong.

Upper Limit

The Japanese central bank is approaching the upper limit of its target for buying bonds, raising prospects it will need to expand the scope of its stimulus program to support the economy before a sales-tax increase in April.

The BOJ bought 6.8 trillion yen of sovereign notes in December, the least since it boosted the program to more than 7 trillion yen a month in April, data compiled by Totan Research Co. show. The purchases may slow further to avoid exceeding the average annual target of a 50 trillion yen increase in the bank’s holdings for the year, according to Tokai Tokyo Securities Co. and Totan. The holdings swelled by 50.3 trillion yen in the nine months through Dec. 31.

“As the Bank of Japan meeting starts today, investors will be watching whether they raise their outlook for the economy and consumer prices,” said Toshihiko Matsuno, a strategist at SMBC Friend Securities Co., a unit of the country’s second-largest lender. “With earnings season about to begin in earnest, we’ll see a lot of buying in anticipation of companies posting strong results.”

More than 520 companies on the Topix report earnings next week, with about 640 filing results the period after, according to data compiled by Bloomberg.

Shippers Advance

Mitsui O.S.K. Lines climbed 2.8 percent to 471 yen. Nomura raised its rating on the shares to buy, saying the company looks undervalued. The brokerage also expects freight rates to improve, according to a report by analyst Masaharu Hirokane. Nippon Yusen K.K. gained 0.9 percent to 331 yen.

Alps Electric advanced 7.7 percent to 1,294 yen, the highest level since February 2008. Goldman Sachs raised its rating on the stock to buy from neutral, while boosting its price target to 1,430 yen from 970 yen.

Among stocks that fell, ANA sank 2.6 percent to 225 yen. Bank of America’s Merrill Lynch unit cut its rating on the stock to underperform from buy. The airline also pulled a television commercial advertising new flights after receiving comments that it was inappropriate.

The commercial shows two Japanese men talking in English about the start of new ANA flights from Tokyo’s Haneda airport, and one of them dons a blond wig and fake nose after the other suggests changing Japanese people’s image.

China’s money-market rates dropped after the central bank added more than 255 billion yuan ($42 billion) to the financial system and expanded a lending facility to meet Lunar New Year demand for cash.

The Topix traded at 1.31 times book value today, compared with 2.65 for the S&P 500 on Jan. 17. U.S. markets were closed yesterday for a holiday. Volume on the Topix was 9.6 percent lower than the 30-day average today.

To contact the reporters on this story: Anna Kitanaka in Tokyo at akitanaka@bloomberg.net; Yuko Takeo in Tokyo at ytakeo2@bloomberg.net

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

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