Japan Exchange Raises Profit Forecast by 36% on Volume

Japan Exchange Group Inc. raised its profit forecast by 36 percent as a rally in the nation’s share market boosted trading volume for the company formed this month from a merger of the nation’s two biggest bourses.

Net income for the year through March 31 will be 9.5 billion yen ($104 million), up from a previous projection of 7 billion yen, the exchange said in its first earnings report since listing on Jan. 4. The bourse said it had 7.31 billion yen in net income for the nine months through December.

Japan Exchange, created this month to cut costs amid slumping volume, has gotten a boost from the Nikkei 225 Stock Average’s best weekly winning streak since 1970. The daily volume of shares traded on the first section of the Tokyo Stock Exchange averaged 3.56 billion shares this month through yesterday, almost double the 1.81 billion shares in the year-earlier period, according to data compiled by Bloomberg.

“The results were within our expectations, but I think some people like the fact that they raised their forecast,” said Hiroshi Torii, a Tokyo-based analyst at Deutsche Bank AG. “The stock tends to be volatile because of its low liquidity.”

Japan Exchange jumped 5.9 percent to 5,500 yen today at the close in Tokyo, while the Nikkei 225 rose 2.3 percent. The exchange surged 42 percent since listing on Jan. 4.

Japanese stocks have rallied amid optimism Prime Minister Shinzo Abe’s new government will press the Bank of Japan for aggressive stimulus to beat deflation. The merger of Tokyo Stock Exchange Group Inc. and Osaka Securities Exchange Co. was part of a government plan to reinvigorate the market by forming a national bourse trading stocks, commodities and other securities.

Politics Driving Rally

“Politics is executing the nation’s policy, I welcome that,” Atsushi Saito, chief executive of the bourse, said today. “So does the market, as you see in turnover and stock levels.”

The cost of integrating trading systems will affect profit next fiscal year, Saito said. The joining of the Osaka and Tokyo trading platforms for cash equities will be completed on July 16 while derivatives trading should be unified by March 2014, according to a statement. The systems integration is expected to yield cost savings in the year ending in March 2015, rising to 7 billion in the following fiscal year.


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