Japanese Shares Post Best Week Since Mid-July After Yen Weakens

  • Investors await U.S. jobs data for clues on rate direction
  • Yen ends week near one-month low, underpinning carmakers

Japanese shares posted the best week in one-and-a-half months as a weaker yen boosted exporters ahead of U.S. jobs data that is seen as key to whether the Federal Reserve will raise interest rates as soon as this month.

The Topix index swung between gains and losses Friday before finishing higher to extend the week’s advance to 4.1 percent, the biggest since the five days ended July 15. The yen declined 1.6 percent against the dollar this week after Fed Chair Janet Yellen’s hawkish remarks a week ago strengthened near-term U.S. rate-increase expectations. Investors deferred taking risks as they closely track economic data out of the world’s largest economy to better gauge timing on higher borrowing costs.

SecurityPercent ChangePrice
Topix+0.3%1,340.76
Nikkei 2250.0%16,925.68
Yen-Dollar-0.2%103.47

“Globally, investors still have a positive sentiment,” said Ken Peng, an Asian investment strategist at Citi Private Bank in Hong Kong. Still, he added that he’d be cautious as “I don’t think you can count on a stronger dollar to weaken the yen much further. If it were to go further, it has to come from the Bank of Japan.”

Manufacturing unexpectedly softened in the U.S. last month, damping expectations for rates to be raised as early as September. The Institute for Supply Management’s index fell by 3.2 points to 49.4 in August, the biggest drop in more than two years. A reading below 50 indicates contraction. Fed officials have said any decision on higher rates is to be data dependent. 

Traders put the likelihood of a September rate increase at 34 percent as of Sept. 2, according to data compiled by Bloomberg data. The closely watched nonfarm payrolls report Friday is projected to show a gain of 180,000 jobs in August.

The yen was slightly weaker against the dollar in Tokyo, trading near a one-month low. On the Topix, 942 stocks fell and 852 rose at the close of trading. The benchmark stock index rose for all but one of the five sessions this week, as automakers and banks underpinned gains.

  • Chugai Pharmaceutical Co., a distributor of cancer drugs, climbed 3.7 percent after U.S. Genentech Inc. reported positive Phase 3 study results for a lung cancer drug known as Tecentriq.

  • J Front Retailing Co. surged 5.2 percent. Nomura Holdings Inc., which holds the largest stake in the retailer, said in a research note it sees upside for the company because of a Ginza redevelopment project scheduled for completion next year.

  • Oil explorers extended declines on lower crude prices. Inpex Corp. fell 0.6 percent, adding to a 2.6 drop Thursday. 

  • Tokyo Dome Corp., a baseball-stadium operator, advanced 5.1 percent. The company is likely to see an increase in first-half operating profit at 6.5 billion yen ($63 million), beating market expectations, the Nikkei newspaper reported. 

  • A gauge tracking auto shares added 6.6 percent this week despite paring gains Friday. Japan’s biggest car manufacturers reported worse-than-expected sales in the U.S. Toyota Motor Corp. said sales sank 5 percent, falling short of market estimations for a 0.4 percent decline. Honda Motor Co. said U.S. vehicle sales fell 3.8 percent compared with expectations for a 1 percent gain. Toyota slid 0.3 percent while Honda lost 0.6 percent.

“We’re now at a critical point for Japanese stocks on whether the renewed interest in cyclical stocks could add momentum,” said Nobuhiko Kuramochi, head of investment information at Mizuho Securities Co. in Tokyo. “It all depends on the jobs data now.”

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