Japan’s Topix Rises Third Day on U.S. Consumer Confidence

Japan’s Topix index rose for a third day after a gauge of U.S. consumer confidence advanced to a six-year high, boosting investor optimism about the outlook for the world’s largest economy.

Kirin Holdings Co. added 2.6 percent after a report the brewer will raise its annual dividend next year and consider share buybacks. Kajima Corp. and Taisei Corp. gained at least 2 percent after Deutsche Bank AG upgraded the construction companies’ equities. Nippon Kayaku Co., which makes agricultural chemicals and explosives, slumped 4.5 percent after Nomura Holdings Inc. cut its rating on the stock.

The Topix increased 0.7 percent to 1,172.07 at the close of trading in Tokyo, with about five shares rising for every three that fell. Volume on the measure was 8.2 percent higher than the 30-day average. The Nikkei 225 Stock Average added 0.4 percent to 14,477.16 after falling as much as 0.2 percent earlier. The yen held at 102.29 per dollar.

“Knowing that the U.S. economic recovery is maintaining its momentum is helping investor sentiment,” said Hiroichi Nishi, an equities manager in Tokyo at SMBC Nikko Securities Inc. “When we enter April, the U.S. data will be from after the cold spell so the expectations are that we’ll see good numbers,” and the market impact of Japan’s sales-tax increase next month will be “slight.”

U.S. Data

The Conference Board’s index of U.S. consumer confidence jumped to 82.3 in March, the highest since January 2008, from 78.3 a month earlier, the New York-based private research group said. The median forecast in a Bloomberg survey of 76 economists called for a reading of 78.5 this month.

Another report showed purchases of new homes in the U.S. fell in February to the lowest level in five months, a sign the industry may take time to pick up after inclement weather damped demand earlier in the year.

Kirin gained 2.6 percent to 1,362 yen. The company will raise its annual dividend to at least 40 yen a share next fiscal year and consider stock buybacks of tens of billions of yen by the end of December 2015, the Nikkei newspaper reported, citing an interview with Senji Miyake, the brewer’s president.

General contractor Kajima increased 2.9 percent to 360 yen after Deutsche Bank raised its rating on the company to hold from sell and boosted its share-price target to 370 yen from 355 yen. Taisei gained 2 percent to 450 yen after Deutsche also increased its rating to hold from sell and target price to 440 yen from 410 yen.

Index Valuations

The Topix traded at 1.15 times book value today, compared with 1.27 times at the start of the year and 2.61 for the Standard & Poor’s 500 Index and 1.84 for the Stoxx Europe 600 Index yesterday.

In Japan, an adviser to Prime Minister Shinzo Abe said the central bank could decide as soon as mid-May whether further stimulus is needed to keep inflation on track for its 2 percent target after a sales-tax bump next month.

Etsuro Honda said in an interview at the Prime Minister’s Office in Tokyo yesterday that while he’s become more confident the economy will withstand the higher levy as inflation expectations take root and price gains accelerate, the first indications of the extent of the blow will appear in May. Honda said he sees “considerable” room for the BOJ to boost the pace at which it buys exchange-traded funds should it decide more stimulus is needed.

Sales Tax

“The consensus is that the BOJ will do additional easing around June or July, so it’s positive if it’s going to come in May instead,” said Soichiro Monji, chief strategist at Tokyo-based Daiwa SB Investments Ltd., which manages 4.9 trillion yen ($48 billion). “Still, I think that’s too optimistic.”

Among stocks that fell, Nippon Kayaku dropped 4.5 percent to 1,136 yen. Nomura cut its rating to neutral from buy and lowered its price target to 1,300 yen from 1,740 yen. The brokerage cited concerns about the outlook for the specialty-chemicals business and the increasing possibility the company will lower its earnings forecasts.

“As we near the end of the first fiscal year in which the NISA program has been running, many account holders will be buying shares as they look to lock in dividends,” SMBC Nikko’s Nishi said, referring to the Nippon Individual Savings Account program, which allows tax exemptions of up to 1 million yen for five years on investment gains. “The yen is stable, too, so high-dividend stocks are likely to be bought,” he said. Japan’s financial year ends March 31.

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