Japan's Stock Rally Wanes Amid Earnings Season as Yen Gains

  • SoftBank shares rise even after reporting a earnings decline
  • Toyota slips before forecasting first profit drop in 5 years

The rally in Japanese shares waned as the yen strengthened, with the benchmark equity index closing little changed after two days of gains amid earnings season.

The Topix fell less than 0.1 percent to 1,334.30 at the close in Tokyo, erasing gains of as much as 1.4 percent in the morning session. The gauge jumped the most in about a month on Tuesday, a second day of advances after its longest losing streak since January. The Nikkei 225 Stock Average added 0.1 percent to 16,579.01. The yen climbed 0.4 percent to 108.79 per dollar after two days of losses.

The recent gain in Japanese shares were “a short-term reaction to the preceding falls,” said Tatsushi Maeno, head of Japanese equities at Pinebridge Investments Japan Co. in Tokyo. Yen moves have the largest impact on stocks, he said. “We’ve had the yen weaken, but it’s difficult to see this continuing for a week or two, for example.”

Japanese earnings season is heading toward its peak, with about 180 companies on the Topix reporting on Wednesday and almost 700 releases on Thursday and Friday.

Toyota Motor Corp. forecast its first annual profit drop in five years after the market closed, citing the stronger yen. It also said it plans to buy back shares. The stock fell 0.8 percent before the announcement.

Softbank Gains

SoftBank Group Corp. gained 1.9 percent. The mobile-tech giant reported quarterly profit fell 30 percent and said it’ll pay full-year dividends of 41 yen per share, more than analyst estimates.

There’s “little reason to be overly pessimistic” and the drop in profits was due to higher-than-expected restructuring costs at its Sprint Corp. unit, said Kei Takahashi, an analyst at Mizuho Securities.

Oki Electric Industry Co. added 7.1 percent after forecasting an 82 percent increase in profit for the year ending March 2017. Sumitomo Heavy Industries Ltd. surged 13 percent after posting profit that beat estimates. Dowa Holdings Co. sank 7.7 percent after the metal miner forecast a 17 percent drop in operating profit this year.

Nichirei Corp. sank 5.7 percent after the packaged-foods maker recalled frozen food produced in the U.S. due to concern about listeria contamination.

Futures on the S&P 500 Index slid 0.3 percent. The underlying U.S. equity gauge gained 1.3 percent on Tuesday, the most in two months. Energy producers, industrial shares, banks and Amazon.com Inc. were among the strongest contributors.

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