Japan Stocks Climb on European Rates Outlook, Weaker Yen

Japanese shares rose, with the Topix index capping the biggest three-week gain since April 2009, after the yen weakened and the European Central Bank and Bank of England signaled they will keep borrowing costs low.

Nippon Sheet Glass Co., which gets 37 percent of its sales from Europe, gained 4.1 percent. CyberAgent Inc., a social gaming and Internet company, jumped 10 percent after Goldman Sachs Group Inc. recommended its shares. Shinsei Bank Ltd., a lender that generates almost half of revenue from consumer credit, rose 3.9 percent after saying it plans to expand into Asia within three years.

The Topix added 1.5 percent to 1,188.58 at the close in Tokyo, the highest since May 24. It gained 4.8 percent this week, bringing its increase over the past three weeks to more than 12 percent. The Nikkei 225 Stock Average climbed 2.1 percent to 14,309.97. Shares rose as the yen’s weakness beyond 100 per dollar improved the outlook for Japanese exporters.

“The ECB and BOE gave the market confidence by trying to contain the rise in yields, thus boosting shares,” said Kuninobu Takeuchi, Tokyo-based executive portfolio manager at DIAM Co., which oversees more than $124 billion globally. “The yen’s current level is very good for corporate earnings. It’s helping companies invest a bit more in Japan after increasing capital spending abroad to escape from a stronger yen.”

Abenomics Expectations

The Topix has gained 38 percent this year on optimism Prime Minister Shinzo Abe will succeed in beating deflation. Abe is expected to push through economic reforms after winning upper-house elections on July 21.

“There is some more upside to the Japanese market ahead of the upcoming elections,” said Masahiko Ejiri, a Tokyo-based senior fund manager at Mizuho Asset Management Co., which oversees the equivalent of $34 billion. “We’re pretty confident Abe will win the election, enabling him to further transform the economy. The weaker yen should be helping Japanese exporters.”

Shares gained after ECB President Mario Draghi pledged to keep interest rates at a record low for an “extended period” yesterday, while BOE chief Mark Carney said increases in market rates weren’t warranted.

Companies that do business in Europe advanced. Nippon Sheet Glass gained 4.1 percent to 101 yen, the highest in a month. Canon Inc., a camera maker that gets 29 percent of revenue from the region, rose 1.7 percent to 3,375 yen.

Weaker Yen

Makers of cars and electric appliances provided the biggest support to the Topix as the yen dropped against 15 of its 16 major counterparts. A weaker yen boosts the value of overseas earnings at Japanese companies when repatriated.

Mazda Motor Corp., which generates 73 percent of sales outside Japan, added 3 percent to 440 yen. Toyota Motor Corp., the world’s biggest carmaker, climbed 2.1 percent to 6,310 yen. Nintendo Co., a maker of video-game consoles that gets 77 percent of revenue abroad, rose 1.8 percent to 11,970 yen in Osaka.

Futures on the Standard & Poor’s 500 Index added 1 percent, signaling U.S. markets may open higher after yesterday’s Independence Day holiday.

The U.S. unemployment rate probably fell to 7.5 percent in June, matching April’s four-year low and down from 7.6 percent in May, according to the median of 82 economists’ estimates in a Bloomberg survey before the Labor Department report today.

CyberAgent Soars

CyberAgent soared 10 percent to 208,500 yen, the biggest advance since Oct. 28, 2011, after Goldman resumed its buy rating on the shares with a price target of 330,000 yen.

Shinsei Bank gained 3.9 percent to 243 yen. The lender is studying Southeast Asian countries where household spending will increase, Chief Executive Officer Shigeki Toma said in an interview, declining to comment on locations. Shinsei aims to boost consumer loans 33 percent by March 2016 as Japan recovers from an industry crackdown on excessive rates, he said.

The Topix has swung an average of about 2.8 percent daily since May 22. The measure’s 30-day historic volatility closed at 36.46 today, near its highest since the 2011 earthquake. The Topix traded at 15 times average estimated earnings, compared with 14.7 for the S&P 500 and 12.9 for the Stoxx Europe 600 Index.