Japanese Stocks Advance on Yen Prospects, New BOJ Members

 Japan stocks rose a second day on speculation the yen’s gains will slow after the U.S. Federal Reserve refrained from adding stimulus. Shares also advanced as lawmakers confirmed two economists seen to support loose monetary policy for the Bank of Japan’s board.

Canon Inc., a camera maker that gets 27 percent of its revenue in the Americas, rose 1.4 percent after the yen fell against the dollar yesterday in response to the Fed announcement. Fanuc Corp., a maker of automation controls used in Chinese factories, fell 0.9 percent after a report China’s manufacturing may contract for an eighth month in June. Renesas Electronics Corp. gained 3.1 percent on a report private equity firms KKR & Co. and Silver Lake may invest in the chipmaker.

The Nikkei 225 Stock Average gained 0.8 percent to 8,824.07 at the 3 p.m. trading close in Tokyo. The broader Topix Index advanced 0.9 percent to 753.96, with about four stocks gaining for each that dropped. Shares also rose on a government report foreign investors were net buyers of Japanese stocks last week for the first time in nine weeks. Japan was the only major market in Asia to rise today.

“We are seeing a sense of relief after a risk-off period,” said Hitoshi Asaoka, a Tokyo-based senior strategist at Mizuho Trust & Banking Co., a unit of Japan’s third-largest bank by market value. “The BOJ board is turning a bit more pro-monetary easing, even though things won’t change much as long as the governor remains the same.”

Both houses of parliament approved Prime Minister Yoshihiko Noda’s appointees to the Bank of Japan’s board, confirming Takahide Kiuchi of Nomura Securities Co. and Takehiro Sato of Morgan Stanley MUFG Securities Co., two economists who are seen by some analysts as favoring loose monetary policy.

Topix Valuation

The Topix fell 14 percent from this year’s peak on March 27 amid concern policy measures won’t be enough to support a global economy hindered by Europe’s debt crisis and China’s slowdown. Shares on the index are valued at 0.89 times book value. A number below one means a company can be bought for less than the value of its assets.

Foreign investors made 58.8 billion ($738 million) in net purchases of Japanese shares last week, based on reports from designated major investors released today by the Ministry of Finance in Tokyo.

Futures on the Standard & Poor’s 500 Index fell 0.4 percent today. The gauge retreated 0.2 percent yesterday after the Fed lowered its U.S. growth forecast to between 1.9 percent to 2.4 percent from an April projection of 2.4 percent to 2.9 percent.

Stopping short of adding to total asset purchases, the U.S. central bank said it will extend its Operation Twist to replace $267 billion of short-term bonds with longer-term debt through year-end. The program had been due to end this month.

Canon added 1.4 percent to 3,275 yen after Japan’s currency fell to 79.70 per dollar yesterday, the weakest since June 13. Honda Motor Co., Japan’s second-largest carmaker by market value, rose 3.5 percent to 2,665 yen. A weaker yen boosts the value of exporters’ earnings when repatriated.

Mixed Blessing

More asset buying, or quantitative easing, from the Fed would be a mixed blessing for Japanese stocks because it improves the U.S. growth outlook while weakening the dollar against the yen, said Seiichiro Iwamoto at Mizuho Asset Management Co. in Tokyo. A weaker yen boosts the value of exporters’ earnings when repatriated.

“Investors are disappointed without QE3, but people in the Japanese market don’t feel that way because the yen won’t be strengthening,” said Iwamoto, who helps oversee about $34 billion.

Japanese stocks pared gains after the HSBC Holdings and Markit Economic purchasing index fell to 48.1 this month from 48.4 in May, signaling China’s manufacturing may shrink for an eighth month. The Shanghai Composite Index dropped 1.3 percent.

‘Investor Sentiment’

“Declines in the manufacturing reading and China’s stocks are weighing on investor sentiment,” said Hiroaki Hiwada, a strategist at Tokyo-based Toyo Securities Co. “That’s prompting profit-taking this afternoon after Japan’s stocks rose more than market participants had expected in the morning.”

Fanuc lost 0.9 percent to 12,840 yen. Hitachi Construction Machinery Co. , a machinery maker that relies on China for 17 percent of its sales, slid 0.7 percent 1,513 yen.

Renesas gained 3.1 percent to 334 yen after the Yomiuri newspaper reported KKR and Silver Lake are in talks to invest “several tens of billions of yen” in the chipmaker, which is seeking support after at least five straight quarterly losses.

Nissan Motor Co. added 1.9 percent to 762 yen as the carmaker plans to cut its domestic output by 14 percent to improve efficiency and counter the strong yen cutting into overseas earnings.

The Nikkei 225 Volatility Index slid 7 percent to 20.92, a fourth day of decline, indicating traders expect a swing of about 6 percent on the benchmark gauge over the next 30 days.

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