Japan Stocks Rise as Lower Borrowing Costs Ease Europe Concern

 Japanese shares rose, with the Nikkei 225 Stock Average finishing a weekly advance, after lower Italian and Spanish borrowing costs signaled that European policy makers are getting a handle on the debt crisis.

Canon Inc., a camera maker that gets a third of its revenue in Europe, rose 3.1 percent after the yen fell against the euro yesterday. Pacific Metals Co. led iron and steel companies higher after Goldman Sachs Group Inc. picked it as one of this year’s top Japanese stocks. Inpex Corp. climbed 1.2 percent after Japan’s biggest energy explorer said it would proceed with a $34 billion liquefied natural gas project in Australia.

The Nikkei 225 rose 1.4 percent to 8,500.02 at the 3 p.m. trading close in Tokyo, climbing 1.3 percent on the week. The broader Topix Index gained 1 percent to 734.60 with about four stocks advancing for each that fell today.

Once concern about Europe’s debt crisis is “lifted at least in the short-term, we should see some good performance in Asian equity markets,” said Diane Lin, a manager with Sydney-based fund Pengana Capital Ltd., which oversees about $1.1 billion in global assets. European Central Bank policy makers “have stabilized the whole situation.”

Futures on the Standard & Poor’s 500 Index rose 0.2 percent today. The gauge added 0.2 percent in New York yesterday as ECB President Mario Draghi said there were signs of economic stabilization after the central bank provided three-year loans to lenders totaling a record 489 billion euros ($628 billion) last month to maintain liquidity.

Debt Auctions

At debt sales yesterday, Spain’s two-year yield fell to the lowest since March after the nation raised 9.98 billion euros, twice as much as its target. Italy’s two-year yields were the lowest since September.

Exporters rose after the yen fell 0.7 percent against the euro yesterday. Canon advanced 3.1 percent to 3,355 yen. Nippon Sheet Glass Co., which has the highest percentage of revenue from Europe on the Nikkei 225, rose 1.5 percent to 138 yen.

“The ECB’s liquidity injection is keeping the debt crisis from spreading,” said Juichi Wako, a senior strategist at Tokyo-based Nomura Holdings Inc. “The yen’s rise against the euro had weighed on Japanese stocks. Now that’s taking a pause, the bias is for equities to be bought back.”

Goldman’s Picks

Pacific Metals added 4.5 percent to 375 yen, while Bridgestone Corp. gained 1.4 percent to 1,733 yen. Iron and steel companies had the second-largest advance in the Topix’s 33 industry groups.

Goldman Sachs said Pacific Metals and Bridgestone are among the Japanese stocks that will advance the most this year as the market recovers from its worst slide since 2008.

Pacific Metals may soar as much as 60 percent, while Bridgestone may climb 55 percent, the investment bank said in a note to clients yesterday.

Inpex gained 1.2 percent to 516,000 yen after saying it and Total SA of France will go forward with their $34 billion Ichthys LNG venture, Japan’s single-biggest investment in Australia, to meet rising demand from utilities.

Japan’s stocks tumbled last year on the yen’s rise, the March temblor and tsunami, and nuclear meltdowns at Tokyo Electric Power Co.’s Fukushima Dai-Ichi nuclear plant. The Topix slumped 19 percent in 2011, exceeding an 11 percent drop in the Stoxx Europe 600 index that tracks companies at the epicenter of the region’s debt crisis.

Shares on the Topix are valued at 0.89 times book value near the lowest since March 2009. A number below one means investors can buy companies for less than the value of their assets.

Before it's here, it's on the Bloomberg Terminal. LEARN MORE