Japan’s Topix Index Rises to Nine-Month High as Yen Falls

Japanese stocks rose, with the Topix Index headed for its biggest monthly gain since February, as a weaker yen buoyed exporters amid optimism incoming Prime Minister Shinzo Abe will increase pressure on the central bank to do more to end deflation.

Honda Motor Co. gained 1 percent after the yen touched a 20-month low versus the dollar. Mitsubishi UFJ Financial Group Inc. added 1.8 percent, leading Japan’s biggest banks higher. Nippon Express Co. jumped 4.3 percent after the freight company said it will buy back shares. Mitsubishi Electric Corp. sank 4.3 percent after the electronics maker said it may pay a penalty for overcharging on some contracts.

The Topix rose 0.6 percent to close at 838.01 in Tokyo, poised for a 7.2 percent advance this month, its biggest monthly increase since an 11 percent gain in February. About three stocks gained for every two that fell on the measure. The Nikkei 225 Stock Average increased 1.4 percent to 10,080.12. Japan’s stock markets were closed yesterday for a holiday.

“Stocks are holding up on optimism for a weaker yen and more monetary easing after Abe said he’ll consider revising the law governing the Bank of Japan unless they adopt a higher inflation target,” said Naoki Fujiwara, chief fund manager at Shinkin Asset Management Co., which oversees about $6.3 billion. “Financial shares are rising on monetary easing and reflation optimism. For instance banks are rising on optimism monetary easing will boost borrowing.”

The Topix is set for a 15 percent increase this year, its biggest yearly gain since 2005, when the index surged 44 percent. The measure traded at 1 times book value, compared with 2.1 for the Standard & Poor’s 500 Index and 1.5 for the Europe Stoxx 600 Index. A number less than one means that companies can be bought for less than the value of their assets.

Inflation Target

Liberal Democratic Party leader Abe said on Fuji Television on Dec. 23 that he will consider revising the law governing the Bank of Japan if it fails to set an inflation target of 2 percent at its January meeting.

The LDP chief is poised to become prime minister in a special session of the lower house of parliament tomorrow after his party’s coalition secured a majority in this month’s elections, sweeping the Democratic Party of Japan from power.

Exporters gained after the yen declined against all 16 of its major counterparts yesterday, touching 84.96 per dollar, the weakest since April 11, 2011.

Honda Motor Co., which counts North America as its biggest market for sales, gained 1 percent to 3,030 yen. Canon Inc., the world’s biggest camera maker, increased 2.1 percent to 3,375 yen.

Financials Gain

“The yen has extended losses on the back of Abe’s comments,” said Toshiyuki Kanayama, a market analyst at Tokyo-based Monex Inc. “Exporters, especially auto and high-tech shares, are going to be bought as investors expect better currency margins. With conditions improving, financial shares are likely to keep playing catch-up and we will see a rally across the board.”

Financial shares also advanced on optimism that an end to deflation will increase loan demand. Mitsubishi UFJ, the country’s biggest bank, gained 1.8 percent to 446 yen, the biggest boost on the Topix. Mizuho Financial Group Inc. rose 1.4 percent to 149 yen. Nomura Holdings Inc., Japan’s biggest brokerage, gained 6.3 percent to 458 yen.

The Nikkei Stock Average Volatility Index fell 3.5 percent to 20.99, indicating traders expect a swing of about 6 percent on the benchmark gauge over the next 30 days.

Among other stocks that rose, Nippon Express jumped 4.3 percent to 337 yen. The company may spend as much as 20 billion yen ($236 million) to buy back 7.67 percent of its shares between Jan. 4 and Oct. 31, the company said in a statement on Dec. 21.

Mitsubishi Electric sank 4 percent to 714 yen. The company cut its net-income forecast by 58 percent to 50 billion yen after saying it may pay a penalty after it overcharged Japan’s Defense Ministry.

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