Japan Stocks Rise as Yen Weakens on Inflation Prospects

Japanese shares rose, with the Nikkei 225 Stock Average gaining for a second day, as the yen weakened after Prime Minister Shinzo Abe pressed for a higher inflation target and China’s trade data beat estimates.

Honda Motor Co., which gets about 81 percent of its sales outside Japan, advanced 2.5 percent. Komatsu Ltd., a maker of construction equipment that gets about 14 percent of sales from China, climbed 1.6 percent. Izutsuya Co. jumped 48 percent after the department-store operator raised its profit forecast. Tokyo Electric Power Co. finished the day flat after a plunge that almost erased a 19 percent gain in seconds. The stock exchange said the selloff wasn’t the result of an error.

The Nikkei 225 gained 0.7 percent to close at 10,652.64 in Tokyo. Trading volume on the gauge was 54 percent above the 30-day average. The broader Topix Index advanced 1.1 percent to 889.02, with about three stocks advancing for each that fell.

“Optimism for policy action is continuing from the end of last year,” said Masaru Hamasaki, chief strategist at Toyota Asset Management Co., which oversees about $20 billion. “The market seems to have priced in half of the weaker yen’s impact on earnings and the effect of Abe’s stimulus measures.”

The Topix has advanced 23 percent since Nov. 14 when elections were announced, driving the gauge into a bull market on expectations a new government would call for more stimulus. An advance of 20 percent or more from a low signals a bull market to some investors. The gauge is trading at 1.06 times book value, compared with 2.19 for the Standard & Poor’s 500 Index and 1.59 for the Stoxx Europe 600 Index.

Inflation Target

Abe said yesterday the Bank of Japan should aim for 2 percent inflation at the first meeting in four years of a panel that brings together government and central bank officials.

Exporters gained as the yen fell against all 16 of its major peers for a second day. A weaker currency boosts the value of overseas earnings for Japanese companies. Honda advanced 2.5 percent to 3,330 yen.

Companies that do business in China advanced after the government reported today the nation’s exports rose 14.1 percent in December from a year earlier. Imports increased 6 percent, leaving a trade surplus of $31.6 billion.

“China’s export data is boosting investor sentiment,” said Grace Tam, Hong Kong-based global market strategist at JPMorgan Asset Management Ltd., which oversees about $1.3 trillion globally. “They beat the consensus and so confidence among investors has been ticking up.”

China-Linked Shares

Komatsu added 1.6 percent to 2,294 yen. TDK Corp., a maker of electronics components that depends on China for 27 percent of its sales, rose 1.5 percent to 3,460 yen.

Futures on the S&P 500 Index rose 0.2 percent today. The gauge yesterday advanced 0.3 percent amid investor optimism about fourth-quarter corporate earnings.

Isuzu Motors Ltd. jumped 3.8 percent to 545 yen after the Nikkei newspaper reported it would partner with General Motors Co. to manufacture pickup trucks.

Izutsuya surged 48 percent to 92 yen, its biggest advance on record and its highest level since July 2008. The department store operator yesterday raised its net income outlook by 46 percent to 1.9 billion yen.

The Nikkei Stock Average Volatility Index added 3.8 percent to 20.15, indicating traders expect a swing of about 5.7 percent on the benchmark gauge over the next 30 days.

Tokyo Electric Power, the utility at the center of the Fukushima nuclear disaster, closed unchanged at 209 yen after rising as much as 20 percent. The gain were mostly erased in less than a minute as the result of several sell orders that weren’t made in error, said Natsuho Torii, a spokesman for Japan Exchange Group Inc.