Japan Stocks Fall as Yen Holds Gains Amid Mixed Profit Reports

Japan's Top Three Banks Expected to See Profit Drop
  • Toshiba slides as reports question how company booked losses
  • Nissin Foods surges as noodle maker lifts profit forecast

Japanese stocks trimmed a fourth week of gains as shares in Tokyo joined a global selloff and investors dissected earnings at industrial robot manufacturers and instant noodle makers. 

Mitsubishi UFJ Financial Group Inc. surged as much as 3.1 percent in the final hour of trading after the Nikkei newspaper reported the bank will buy back about 100 billion yen ($815 million) of its own shares.

All but eight of the 33 industry groups declined on the Topix index, which closed 0.5 percent lower at 1,585.83, paring this week’s advance to 1.4 percent. As earnings season progresses, some 55 percent of Topix constituents have topped quarterly profit estimates. The yen strengthened against the dollar Thursday after Federal Reserve officials emphasized the need for a cautious approach to monetary policy, even as they reiterated their preference for a rate rise this year.

“It is likely that Japanese stocks will be on hold after a round of selling ends in the morning,” said Nobuyuki Fujimoto, a senior market analyst at SBI Securities Co. in Tokyo. The Fed “wants to see the impact on the job markets and business growth after a rate rise. It won’t pick up the pace drastically,” he said.

History of Topix earnings and sales surprises
History of Topix earnings and sales surprises
Source: Bloomberg

The Topix rallied 16 percent from a September low though Thursday as investors scrutinized economic data to assess whether the Bank of Japan will add to already unprecedented monetary stimulus as the Fed begins to tighten policy. While concern about the U.S. rate increase is weighing on risky assets around the world, for Japan equities that’s partly offset by a stronger dollar, which improves the earnings outlook for exporters.

The Nikkei 225 Stock Average fell 0.5 percent to 19,596.91 on Friday, declining for the first time in eight days. The yen traded at 122.69 per dollar after gaining 0.2 percent Thursday.

Bank of Japan officials view next week’s gross domestic product data as unlikely to change their outlook for an improving trend in inflation, said people familiar with discussions at the central bank.

The officials acknowledge that risks for prices and the economy are skewed to the downside and said the BOJ stands ready to adjust policy if needed, according to the people, who asked not to be identified because the talks are private.

THK Co. tumbled 8.1 percent after the manufacturer of mechanical components cut its full-year operating profit forecast by 34 percent to 21 billion yen. Kadokawa Dwango Corp. soared 8.4 percent as the media and movie publisher maintained its profit forecast.

Toshiba Slumps

Toshiba Corp. sank 5.9 percent after reports questioning how the industrial group booked losses at its nuclear power operations over the past two fiscal years.

Sumitomo Mitsui Trust Holdings Inc. lost 1.9 percent after saying it won’t buy back stock. Investors had been expecting a share repurchase, according to SMBC Nikko Securities Inc. analyst Shinichiro Nakamura.

Nissin Foods Holdings Co. surged 9.5 percent, the biggest gain since 1997, after the maker of instant noodles raised its profit forecasts.

Investors in the so-called megabanks will be scouring through earnings results expected to be released after the markets closed on Friday. Mitsubishi UFJ closed 1.5 percent higher after the Nikkei newspaper report, ahead of its scheduled release time.

Megabank Earnings

The megabanks, which also include Sumitomo Mitsui Financial Group Inc. and Mizuho Financial Group Inc., are responding to a slowdown in Asia’s economy that has weakened overseas loan growth, while global financial-market volatility crimped fee businesses.

Japan Post Holdings Co., which has climbed 35 percent since listing in Tokyo this month, reported earnings along with Japan Post Insurance Co. and Japan Post Bank Co. after the Tokyo market shut Friday. Japan’s government raised 1.44 trillion yen from the IPO, the world’s largest since Alibaba Group Holding Ltd. in September 2014 and the nation’s biggest state asset sale since 1987.

E-mini futures on the Standard & Poor’s 500 Index added 0.1 percent after the underlying gauge fell 1.4 percent Thursday.

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