Japan Stocks Rise on Earnings as Yen Weakens After Fed Statement

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Japanese stocks rose as strong earnings from Nintendo Co. to Hitachi Ltd. boosted shares, while the yen weakened after the Federal Reserve confirmed the barriers to raising U.S. interest rates this year are getting smaller.

A weaker yen and sales of a new video game boosted profit at Nintendo, sending shares 8.3 percent higher. Industrial conglomerate Hitachi soared 6.5 percent after first-quarter net income grew by almost a third. Showa Shell Sekiyu KK jumped 6.2 percent after the Nikkei newspaper reported energy explorer Idemitsu Kosan Co. agreed to boost its stake in the oil importer. Panasonic Corp. tumbled 5.8 percent as the electronics maker’s profit missed estimates.

The Topix index climbed 0.8 percent to 1,647.21 at the close in Tokyo, with all but six of its 33 industry groups rising. The Nikkei 225 Stock Average added 1.1 percent to 20,522.83. The yen dropped 0.2 percent to 124.13 per dollar, weakening for a second day after Fed policy makers said the U.S. labor and housing markets had improved, while refraining from providing timing for interest-rate increases.

The Fed’s suggestion that “we’re clearly headed for rate hikes and that their time is approaching” will push the yen into weaker territory against the dollar, said Hitoshi Asaoka, Tokyo-based senior strategist at Mizuho Trust & Banking Co. While there are a few soft patches such as Panasonic, “the fundamental takeaway is that earnings are being aided by the weaker yen.”

Earnings Season

More than 500 Japanese companies report earnings on Thursday and Friday, representing nearly a third of all firms in the Topix. Of the 406 to report so far, 59 percent have exceeded profit expectations, an improvement from the 48 percent that beat forecasts in the previous quarter, according to data compiled by Bloomberg.

Nintendo jumped the most in more than four months, rising 8.3 percent, after returning to quarterly profit on sales of the new Splatoon game and a weaker Japanese yen. Net income in the three months through June was 8.28 billion yen ($67 million), up from a loss of 9.9 billion a year earlier, aided by a 10.8 billion yen windfall the company recorded from the weaker currency.

Hitachi soared 6.5 percent as higher sales and lower costs on the back of cheaper oil boosted first-quarter income by 31 percent from a year earlier.

Potential Merger

Showa Shell Sekiyu jumped 6.2 percent after the Nikkei reported Idemitsu agreed to acquire shares from Royal Dutch Shell Plc. The move would allow Idemitsu to become the largest shareholder in the oil importer, paving the way for a potential merger of the two firms, the Nikkei reported. Idemitsu shares closed 4 percent lower after initially surging.

Panasonic tumbled 5.8 percent, the most since February 2014, after quarterly profit fell 7 percent to 76.6 billion yen, missing estimates for 92.6 billion yen. The company attributed the result to lower demand in the Japanese housing market for solar panels.

The Fed in a statement on Wednesday after its two-day policy meeting described job gains as “solid,” and it dropped the modifier “somewhat” to describe a decline in labor-market slack.

The Fed statement “was as envisioned,” said Mitsushige Akino, executive officer at Ichiyoshi Asset Management Co. in Tokyo. “So long as the U.S. economy keeps growing moderately, markets will trade with the expectations of higher interest rates. That they see the U.S. economy gradually expanding will be of comfort” to investors.

U.S. GDP

With Chair Janet Yellen and her fellow policy makers saying their decisions are “data dependent,” the focus turns to figures for growth, jobs and inflation that will help determine whether the Fed raises rates in September, as many economists expect, or later in the year. The U.S. will report second-quarter gross domestic product on Thursday, with economists expecting annualized growth of 2.5 percent, recovering from the previous quarter’s 0.2 percent contraction.

Japanese industrial production rose 2 percent in June from a year earlier, beating economists’ estimates for a 1.3 percent gain, a preliminary reading on Thursday showed. That followed a 3.9 percent decline in May.

Futures on the Standard & Poor’s 500 Index slid 0.1 percent after the underlying U.S. measure rose 0.7 percent on Wednesday as improving earnings and stability in Chinese markets boosted investor sentiment.

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