Japan’s Topix Extends Five-Year High as Yen Weakens

Japanese shares rose, with the Topix index advancing to its highest since July 2008, as the yen fell to as low as 105 per dollar and shippers climbed.

Kawasaki Kisen Kaisha Ltd. gained 3.5 percent, leading shipping lines to the biggest advance among the 33 Topix industry groups. J. Front Retailing Co. increased 1.7 percent after the department-store firm’s operating profit beat analyst estimates. Takeda Pharmaceutical Co., Japan’s largest company in the sector, sank 5.2 percent after ending the development of a diabetes drug on concerns about liver safety.

The Topix added 0.8 percent to 1,290.07 at the close of trading in Tokyo, after falling as much as 0.3 percent. The measure capped a 2.3 percent increase this week and closed at its highest since July 31, 2008. The Nikkei 225 Stock Average was little changed at 16,178.94 today after advancing to its highest since November 2007 yesterday. The yen traded near a five-year low against the greenback.

“Japan stocks are very closely linked to moves in the yen,” said Andrew Sullivan, a Hong Kong-based director of sales trading at Kim Eng Securities. “There may be some profit-taking into the year-end but most seem to think the rally will continue as Abenomics takes effect. Only the cautious will be taking money off the table at this stage.”

The Topix has surged 50 percent this year and is poised for its third-biggest annual advance on record, as Prime Minister Shinzo Abe and Bank of Japan Governor Haruhiko Kuroda take steps to end 15 years of deflation. Strategists surveyed by Bloomberg expect the equity measure to climb 15 percent to 1,484.50 by the end of 2014, as the yen weakens amid prospects for further stimulus by the BOJ while the Federal Reserve cuts back.

Jobless Claims

Futures on the Standard & Poor’s 500 Index were little changed today. The measure rose 0.5 percent yesterday as a drop in applications for unemployment benefits fueled optimism.

U.S. jobless claims decreased by 42,000 to 338,000 in the week ended Dec. 21, a Labor Department report showed in Washington. The median forecast of 42 economists surveyed by Bloomberg called for a drop to 345,000. Continuing claims rose.

Data in Japan showed core consumer prices excluding fresh food increased 1.2 percent year on year in November, beating the 1.1 percent estimate of 30 economists surveyed by Bloomberg. Separately, industrial production increased 0.1 percent month on month in November, the Economy Ministry said in Tokyo. Analysts expected a 0.4 percent advance.

The yen is headed for a 0.6 percent decline against the dollar this week, its ninth straight weekly drop. The Japanese currency fell to as weak as 105.03 today, after yesterday retreating to its lowest since October 2008. Analysts expect the yen to drop to 109 in the fourth quarter of 2014, estimates compiled by Bloomberg show.

Shippers Advance

Shippers led gains on the Topix today, while banks and carmakers provided the biggest boost. Kawasaki Kisen climbed 3.5 percent to 265 yen. Mitsubishi UFJ Financial Group Inc., Japan’s biggest lender, added 1.2 percent to 677 yen. Toyota Motor Corp. rose 0.8 percent to 6,390 yen.

J. Front Retailing added 1.7 percent to 789 yen. The company’s third-quarter operating profit rose 16 percent to 7.3 billion yen, according to calculations by Bloomberg News, beating the 7.2 billion yen estimate of analysts surveyed by Bloomberg.

“Shares are still cheap considering the likely upwards revision to earnings this quarter, so buying will spread,” said Juichi Wako, a Tokyo-based equity strategist at Nomura Securities Co., Japan’s biggest brokerage. “Stocks have risen a lot this week, so investors looking to adjust their holdings may take profits.”

Topix shares traded at 15.7 times estimated profits today, about 30 percent below the average of 22.2 since 2001, according to data compiled by Bloomberg. Earnings per share for companies on the gauge are forecast to jump 12 percent in the next 12 months, the data show.

Takeda Slides

Among stocks that fell, Takeda lost 5.2 percent to 4,835 yen, the biggest drop since May 10. The stock lost the most on the Nikkei 225 after scrapping development of diabetes drug TAK-875 after failing to show the medicine’s benefit outweighed its risk. The drugmaker now has one less candidate to succeed Actos, once the world’s best-selling diabetes medicine, and buffer a decline in sales from cheaper generics.

Prime Minister Shinzo Abe’s visit to a shrine honoring war criminals and others yesterday risked deepening tensions with the country’s largest trading partner. Trade between Japan and China has almost tripled since 2000 to about $250 billion, increasing the commercial cost of political fallout between Asia’s two largest economies.

“There is the worry about the impact on exports to China from Prime Minister Abe’s visit to the war shrine,” Kim Eng’s Sullivan said.

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