Japan Shares Rise Third Day on Tankan Survey, Weaker Yen

Japanese shares rose, with the Topix index capping the biggest three-day rally in almost three months, as the yen fell and a survey showed positive sentiment among manufacturers for the first time in seven quarters.

Mazda Motor Corp., an automaker that gets 73 percent of sales abroad, rose 4.9 percent. Brokerages gained the most among the 33 Topix subsectors. Hisamitsu Pharmaceutical Co. jumped 6.4 percent after the drugmaker won U.S. approval for a hot flash medicine. Aeon Co. added 2.3 percent after the Nikkei newspaper reported Japan’s No. 1 retailer will post its biggest quarterly operating profit in seven years.

The Topix increased 1.5 percent to 1,150.70 at the close in Tokyo, with volume 37 percent below the 30-day average. All but one industry group advanced. The gauge climbed 7.6 percent over the past three trading days, the most since April 8. The Nikkei 225 Stock Average gained 1.3 percent to 13,852.50.

“Foreign investors will buy Japanese stocks as long as the yen remains weak, because earnings are good,” said Ichiro Yamada, general manager of equities who oversees about $3 billion at Fukoku Mutual Life Insurance. “There’s no doubt conditions are good for stocks.”

The Topix climbed 47 percent in the nine months through June, its biggest three-quarter gain in more than 40 years, amid optimism Japan may beat deflation and achieve sustainable growth. The gauge has fallen 9.8 percent since an almost five-year high on May 22, paring this year’s gain to 34 percent.

Volatility Continues

The Topix has swung an average of about 3 percent daily since May 22. The gauge’s 30-day historic volatility closed at 42.79 today, its highest since the 2011 earthquake and tsunami.

Stocks gained as the yen fell against all of its 16 major counterparts, touching 99.54 per dollar, the lowest since June 5. A weaker yen increases the value of Japanese exporters’ overseas profits when repatriated.

Mazda rose 4.9 percent to 410 yen. Sony Corp., an electronics maker that generates 68 percent of sales overseas, gained 2.7 percent to 2,133 yen. Toshiba Corp., which gets 18 of revenue in North America, added 2.1 percent to 487 yen.

Shares also climbed after the quarterly Tankan index showed positive sentiment among large manufacturers for the first time since September 2011. The gauge rose to plus four in June from minus eight in March, the Bank of Japan said in Tokyo today. A positive figure means optimists outnumber pessimists. The median estimate of 22 economists in a Bloomberg survey was for a plus three reading.

China PMI

Companies in the survey forecast the yen to average 91.20 per dollar in the fiscal year ending March 2014, compared with a projection of 85.22 in the previous report.

Stocks earlier erased gains as data showed manufacturing in China expanded at the slowest pace in four months in June after a cash squeeze reduced the flow of credit to companies. The Purchasing Managers’ Index was at 50.1, down from 50.8 in May, the National Bureau of Statistics and China Federation of Logistics & Purchasing said today.

Hisamitsu Pharmaceutical jumped 6.4 percent to 5,360 yen after the U.S. Food and Drug Administration said June 28 it cleared a drug for easing hot flashes made by the company’s Noven unit. The treatment, to be called Brisdelle, is the first approved non-hormonal alternative for helping women avoid sweating and feverish feelings linked to menopause.

Aeon added 2.3 percent to 1,332 yen, the highest since May 15. The Nikkei said the retailer would post operating profit of about 34.5 billion yen ($347 million) in the March-May quarter.

Brokerages Jump

Brokerages gained the most among the Topix’s industry groups, climbing 3.6 percent to its highest since June 12. Nomura Holdings Inc., Japan’s biggest securities firm by market value, rose 2.6 percent to 750 yen. Osaka-based Kosei Securities surged 14 percent to 283 yen. Iwai Cosmo Holdings Inc., also from Japan’s second-largest city, soared 11 percent to 1,273 yen.

A gauge tracking energy explorers was the only Topix group that fell. Inpex Corp., which accounts for 83 percent of the subgroup, lost 0.5 percent to 41,200 yen.

The Topix will rise to 1,270 by year-end, according to 18 analysts surveyed by Bloomberg News. It’s the first time the median estimate has fallen since the rally in Japanese equities began in mid-November.

The gauge traded at 14.5 times average estimated earnings, compared with 14.6 for the Standard & Poor’s 500 Index and 12.6 for the Stoxx Europe 600 Index.

Futures on the S&P 500 rose 0.6 percent ahead of U.S. manufacturing data due today. The Institute for Supply Management’s factory index probably rose to 50.5 in June from 49 in May, which was the lowest since June 2009. A reading over 50 indicates expansion. The gauge fell 0.4 percent on June 28.

Before it's here, it's on the Bloomberg Terminal.