Japanese shares jumped, with the Nikkei 225 Stock Average closing at its highest since May, as the yen weakened after Finance Minister Taro Aso said the nation must retain the option to intervene in currency markets.
Fast Retailing Co., a clothing retailer with an about 9 percent weighting on the Nikkei 225, surged 5.2 percent. Mitsubishi UFJ Financial Group Inc. and Mizuho Financial Group Inc. gained on a report the lenders will raise their profit forecasts today. Sportswear maker Mizuno Corp. sank 3.2 percent after halving its net-income outlook.
The Nikkei 225 added 2.1 percent to 14,876.41 in Tokyo, its highest close since May 22. The broader Topix index climbed 1.2 percent to 1,218.55, with all but one of its 33 industry groups rising. Shares advanced in the morning as remarks by Janet Yellen, the nominee to lead the Federal Reserve, fueled optimism the U.S. will maintain stimulus. The yen slid 0.4 percent to 99.64 per dollar.
“Yellen’s speech is making the market buoyant as the view spreads that tapering will be delayed,” said Hiroaki Hiwada, a strategist at Toyo Securities Co. in Tokyo. Aso’s comments provide “verbal support. While it’s unlikely they’ll intervene with the currency at these levels, it’s positive as it means there’ll be pressure on the yen if it strengthens.”
As with other nations, Japan needs to be able to intervene in currency markets if necessary, Aso said at a parliamentary committee today in response to a question about the government’s special foreign-exchange accounts law. The country must set aside a proper amount of money to fund such actions, he said.
The yen weakened after Aso’s comments during the cash-equity trading break, driving exporters higher. The Topix Electrical Appliance index gained 1.7 percent, the biggest boost to the broader gauge. Sony Corp., which gets about 70 percent of sales overseas, added 2.3 percent to 1,786 yen. Panasonic Corp., which gets nearly half its revenue abroad, advanced 4 percent to 1,031 yen.
Nikkei 225 futures jumped as the yen weakened during the break, prompting gains on the underlying measure when it reopened in the afternoon. The gauge’s closing level was the highest relative to the Topix since May.
Fast Retailing, the most heavily-weighted stock on the Nikkei 225, jumped 5.2 percent to 34,250 yen. SoftBank Corp. and Fanuc Corp., the second and third-largest, climbed 1.2 percent and 3.2 percent respectively.
“The yen weakened and Nikkei 225 futures rose in the cash-equity trading break,” said Gentoku Kiyokawa, Tokyo-based head of Japanese investment management at BNP Paribas Investment Partners, which oversees the equivalent of $647 billion. “It looks like this spurred a surge in arbitrage trading in Fast Retailing’s cash stocks, which have the heaviest weighting on the Nikkei 225. Other shares with big impacts on the gauge also rose significantly.”
Futures on the Standard and Poor’s 500 Index climbed 0.3 percent. The measure gained 0.8 percent to a record yesterday. Yellen said the U.S. economy and labor market are performing “far short of their potential” and must improve before the central bank can begin reducing bond purchases.
“The view that tapering of stimulus won’t happen for a while is spreading,” said Mitsushige Akino, chief fund manager at Ichiyoshi Asset Management Co. in Tokyo. “Japanese shares will also benefit from a risk-on scenario.”
Mitsubishi UFJ, Japan’s biggest bank, gained 1.6 percent to 645 yen today, its highest since Sept. 26. Mizuho rose 0.9 percent to 214 yen. The lenders will boost their net-income outlooks by about 10 percent, the Nikkei newspaper reported this morning, without citing anybody.
Mizuho posted earnings after the close, raising its profit forecast to 600 billion yen from 500 billion. Mitsubishi UFJ releases earnings at 4:30 p.m. local time.
Among stocks that fell, Mizuno sank 3.2 percent to 553 yen. The sportwear maker lowered its full-year forecast for net income by 50 percent.
Japan’s gross domestic product rose an annualized 1.9 percent in the July-September period after gaining 3.8 percent the previous quarter, the Cabinet Office reported today in Tokyo. The median of 27 estimates in a Bloomberg News survey was for a 1.7 percent increase. This marks a second quarter of slowing growth, as weaker consumer spending and a decline in export growth outweighed stronger real-estate investment.
“There are both positives and negatives to the GDP figures,” said Akio Yoshino, chief economist in Tokyo at Amundi Japan Ltd., which oversees about 3.3 trillion yen ($33 billion). “One the one hand, it shows Abenomics is steadily moving forward. However, even though the yen has corrected and has been weakening over the past nine months, capital investment is still weak. But I think the slowdown in GDP growth will be temporary.”
The Topix traded at 1.25 times book value today, compared with 2.57 for the S&P 500 and 1.78 for the Stoxx Europe 600 Index yesterday. The Japanese measure’s 30-day volatility was 16.08 today, down from its five-year median of 19.1. Volume on the gauge was 24 percent above the 30-day average today.