Japanese Stocks Gain as Extra Fiscal Stimulus News Outweighs BOJ

  • Nikkei reports government considering extra fiscal budget
  • BOJ refrains from adding to record 80 trillion yen stimulus

Japanese stocks rose, with the Topix index capping its best monthly gain in more than two years, as investors looked past a Bank of Japan decision to refrain from adding to monetary easing and focused on earnings and a report that the government is considering extra fiscal stimulus.

Shionogi & Co. jumped to the highest close since August after the Nikkei newspaper reported the drugmaker will release a one-day treatment for influenza in 2018. Friday is the busiest day of earnings season, with more than 300 companies reporting, including Japan Airlines Co., which rose 2.8 percent. Companies benefiting from China ending its one-child policy gained. Pigeon Corp., which sells baby-care products in China, surged 11 percent. Nintendo Co. sank for a second day after Macquarie Group Ltd. cut its rating following a delay to the company’s foray into smartphone games.

The Topix rose 0.7 percent to 1,558.20 at the close in Tokyo, capping a monthly advance of 10 percent, the best since April 2013. The Nikkei 225 Stock Average added 0.8 percent to 19,083.10, its highest close since Aug. 28 The yen traded strengthened 0.2 percent to 120.94 per dollar following the BOJ’s decision and the Nikkei newspaper reported the Japanese government may boost the extra budget if third-quarter gross domestic product shows the economy needs shoring up.

With the BOJ meeting out of the way, “it’s not surprising that stocks are back up as investors shift their eyes to earnings and government moves,” said Takuya Takahashi, a Tokyo-based senior strategist at Daiwa Securities Group Inc. “The extra budget will of course be see as favorable.”

Extra Budget

The Nikkei reported that the government may boost the extra budget if third-quarter GDP, which will be announced on Nov. 16, shows the economy needs aid. The budget will focus on measures to support farmers and others affected by the recently agreed trans-Pacific trade deal and other steps.

Economists were split over whether the BOJ would expand its already record asset-80 trillion yen purchase program, with 16 of 36 surveyed by Bloomberg News expecting additional easing. Investors shifted focus to BOJ Governor Haruhiko Kuroda’s press conference scheduled for 3:30 p.m. in Tokyo where he’s expected to explain the policy makers’ decision.

Abe Stimulus

“Although the BOJ did not add any extra stimulus, both the Nikkei and dollar-yen are trading at multi-month highs on reports that the government is considering adding to the size of the extra budget, fueling speculation that more aggressive easing measures will be announced by Prime Minister Shinzo Abe before year-end,” said David Welch, head of equity sales trading at Reorient Group in Hong Kong.

Government data Friday showed Japan’s consumer prices excluding fresh food fell 0.1 percent in September from a year earlier, less than the 0.2 percent decline expected by analysts. Separate data showed the jobless rate was 3.4 percent in September, matching economist estimates and unchanged from August.

Shionogi rallied 11 percent, its highest close since Aug. 20, after the Nikkei reported the drugmaker will launch a pioneering influenza drug as soon as 2018. The drug will allow treatment in one-day and be ingested orally.

Earnings Season

Friday marks the busiest day of earnings season, with more than 300 companies reporting results. Of the three-quarters to report so far for which there are estimates, 51 percent have exceeded forecasts on sales, worse than last quarter’s 57 percent, according to data compiled by Bloomberg. Only 47 percent beat profit expectations, less than the 64 percent last quarter.

China’s decision to scrap its one-child policy sent companies that sell diapers and baby-care product in the country higher. Baby-care-goods makers Pigeon jumped 11 percent, while Unicharm Corp., which relies on China for 16 percent of sales, added 3.6 percent.

Nintendo plunged for a second day after delaying a planned smartphone games system by at least three months. The stock dropped 7 percent, bringing its two-day decline to 15 percent and wiping out 500 billion yen ($4.2 billion) of value.

E-mini futures on the Standard & Poor’s 500 Index rose 0.4 percent. The underlying measure slipped less than 0.1 percent on Thursday as mounting speculation U.S. interest rates will be raised this year capped an October advance that’s on target to be the biggest in four years.

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