Japan Stocks Rise as Investors Await U.S Jobs to Gauge Fed Moves

Assessing the Health of Japan's Economy
  • Fast Retailing jumps after saying May Uniqlo Japan sales rose
  • Takata gains on report Bain Capital, PAG Asia evaluating bids

Japanese stocks rose in thin trading ahead of a report on U.S. employment which will help investors gauge whether the Federal Reserve will raise rates as early as this month.

The Topix index added 0.4 percent to 1,337.23 at the close in Tokyo on volume 21 percent below the 30-day average. The gain wasn’t enough to offset the last two days’ loss, with the measure capping a weekly decline of 0.9 percent, its first such drop in a month. The Nikkei 225 Stock Average climbed 0.5 percent to 16,642.23. The yen traded at 108.75 per dollar, rising for a fourth day. A measure of U.S. stocks jumped to a seven-month high on optimism the American economy is strong enough to withstand a boost to borrowing costs.

“The level of attention on tonight’s employment data is very high,” said Mitsuo Shimizu, an equity strategist at Japan Asia Securities Group in Tokyo. “The market may rise a bit but it could be a tug of war after that as investors scrutinize what impact the data may have on the possibility of higher interest rates.”

Futures on the S&P 500 Index were little changed after the underlying gauge added 0.3 percent on Thursday, rising to its highest level since November. Data signaled sustained firming in the U.S. labor market, with filings for unemployment benefits declining for a third consecutive week. An earlier report showed companies added 173,000 workers to payrolls in May, in line with analysts’ projections.

Economists surveyed by Bloomberg forecast the American government payrolls report on Friday will show employers added 160,000 jobs in May, the same as in April, with the unemployment rate slipping to 4.9 percent. A strong reading will reinforce the Federal Reserve’s stance that the economy is improving and that higher interest rates are warranted. Traders are now pricing in a 55 percent chance the Fed will increase rates in July, while betting there’s a 22 percent probability the central bank will act this month.

“If tonight’s figures are in-line, that will connect with the market’s expectations for higher U.S. interest rates,” said Makoto Sengoku, a market analyst at Tokai Tokyo Research Center. “That should lead to a weaker yen which will support Japanese stocks next week.”

Japanese stocks were whipsawed this week after starting the first two days rallying on expectations the U.S. economy is strong enough to handle an increase to rates and amid speculation Prime Minister Shinzo Abe would postpone a planned increase to the consumption tax and unveil a fiscal package. Shares later erased those gains after Abe’s confirmation of the levy delay lacked details on stimulus, and concern grew the government won’t do enough to boost the economy further.

For more on Abe’s sales-tax delay and ensuing disappointment, click here.

OPEC Meeting

Oil prices rose, shrugging off OPEC’s decision to stick to its policy of unfettered production after members rejected a proposal to adopt a new output ceiling. Saudi Arabia floated an idea of restoring an output ceiling, but ministers decided at a meeting in Vienna on Thursday that a cap wasn’t necessary at this stage. An 80 percent rally in oil prices since January made OPEC ministers confident that the group’s two-year-old strategy of trying to win market share from higher-cost producers is working.

Uniqlo Jumps

Fast Retailing Co. jumped 6.9 percent, the most in four months and the biggest support to the Nikkei 225, after saying sales at its Japanese Uniqlo stores rose 5.9 percent in May from a year earlier, the most since January. The Topix Retail Trade Index gained 1.8 percent, ending the week as the second best performer among the Topix’s 33 industry groups, after Prime Minister Shinzo Abe confirmed he will delay a planned sales-tax increase.

Takata Corp. closed 1.6 percent higher after soaring as much as 12 percent in early trading. Bain Capital and PAG Asia Capital are evaluating bids for the scandal-ridden air-bag maker, joining KKR & Co. among those interested in an offer, according to people familiar with the matter.

Capcom Co. added 3.7 percent. Bank of America Corp.’s Merrill Lynch unit reiterated its buy rating on the stock, citing the release of a new game and higher profits from existing titles.

Fujitsu Ltd. slumped 3.4 percent after the Nikkei newspaper reported the computer maker’s costs to overhaul its data centers could be more than double what was initially estimated.

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