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Japan’s Nikkei Extends Eight-Month High as Yen Declines

Japanese shares rose, with the Nikkei 225 Stock Average extending an eight-month high, as the yen’s drop to an 11-month low against the dollar buoyed earnings prospects for exporters.

Honda Motor Co., a carmaker that gets 44 percent of its revenue in North America, rose 3.5 percent amid optimism for the U.S. economic recovery. Nippon Chutetsukan KK rose 7.5 percent after the iron-pipe maker raised its net-income forecast. Sharp Corp. slid 5.3 percent after the electronics maker forecasting a record loss named a new president.

The Nikkei 225 Stock Average rose 0.7 percent to 10,123.28 at 3 p.m. in Tokyo, the highest close since July 22. The broader Topix Index gained 0.8 percent to 863.61. The MSCI Asia Pacific Index excluding Japan lost 0.2 percent.

“Perhaps we are seeing a sustained devaluation of the yen, which would improve the outlook for Japanese exporters in particular,” said Tim Schroeders, who helps manage $1 billion in equities at Pengana Capital Ltd. in Melbourne. “Perhaps what we are seeing is a redirection of asset allocation toward Japan because a lot of fund managers are underweight, and that’s pushed up the market very quickly ahead of fundamentals.”

Futures on the Standard & Poor’s 500 Index rose 0.2 percent today. The gauge lost 0.1 percent in New York yesterday, snapping a five-day advance that drove it to the highest level since June 2008.

Weaker Yen

Stocks gained as the yen reached 84.18 against the dollar today, its lowest since April 13. The currency has weakened on the Bank of Japan’s expansion of its asset-purchase program and signs of U.S. recovery. BOJ Governor Masaaki Shirakawa signaled on March 13 that additional bond purchases aren’t off the table. U.S. reports this week are expected to show that initial jobless claims fell and industrial production climbed.

“The BOJ was a trigger, but the yen has been weakening because the U.S. economy is stronger than expected,” said Kazuyuki Terao, chief investment officer of RCM Japan Co. “A drop in the yen may well improve earnings, and the market is simply pricing that in.”

Honda advanced 3.5 percent to 3,295 yen. Canon Inc., a camera maker that generates more than 80 percent of its sales abroad, rose 3.7 percent to 3,945 yen.

Overbought Indicators

Gains in stocks were limited as the 14-day relative strength index for the Nikkei 225 rose to 78 today, above the 70 threshold that some traders say signals shares have been overbought.

The Nikkei 225 has risen about 20 percent this year, the second best performer after German stocks among 24 developed markets this year, according to data compiled by Bloomberg. Shares in the Japanese benchmark are valued at 24.2 times estimated earnings on average, compared with 13.4 times for the S&P 500 and 11.2 times for the Stoxx Europe 600 Index.

The Nikkei 225 Volatility Index fell 2.4 percent to 22.75, indicating traders expect a swing of about 6.5 percent on the benchmark gauge over the next 30 days. Trading volume on the index was 39 percent above its 100-day average, according to data compiled by Bloomberg.

The following were among the most active shares in the Japanese market today. Stock symbols are in parentheses after company names.

Inpex Corp. (1605 JT), Japan’s biggest energy explorer, gained 1.4 percent to 573,000 yen. It announced it was awarded a license to produce natural gas at the Ichthys project off the coast of Western Australia.

Mazda Motor Corp. (7261 JT) added 6.1 percent to 140 yen after receiving orders for 8,000 of its CX-5 compact sport-utility vehicle in the first month. The automaker had targeted 1,000 units a month, according to a statement.

Nippon Chutetsukan KK (5612 JT) rose 7.5 percent to 215 yen after the pipe maker raised its net-income forecast by 45 percent to 580 million yen ($6.9 million) for the year ending March 31. The company cited falling material prices, progress on a delayed waterline project and swelling supplies of cast iron for the change in outlook.

Sharp Corp. (6753 JT) slid 5.3 percent to 503 yen after the electronics maker named Takashi Okuda its new president following its forecast of a record loss amid falling prices for its Aquos TVs. Okuda, 58, now an executive officer, will replace Mikio Katayama effective April 1, the Osaka-based company said in a statement.

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