Japan Stocks Rise on Speculation U.S. Economy Recovering

Japanese shares rose, with the Topix index paring yesterday’s drop, after U.S. shares gained amid speculation the world’s largest economy is recovering from a first-quarter contraction.

Rakuten Inc. advanced 2.9 percent following a report the online retailer is in talks to invest in a Japanese budget airline with AirAsia Bhd. Yahoo Japan Corp. added 0.9 percent after saying it will acquire the credit and financial operations of KC Card Co. Dainippon Screen Manufacturing Co. slid 2.3 percent after Bank of America Corp.’s Merrill Lynch unit initiated coverage of the stock with an underperform rating.

The Topix climbed 0.2 percent to 1,263.43 at the close of trading in Tokyo. The measure fell 0.6 percent yesterday, while the Standard & Poor’s 500 Index gained 0.5 percent. The Nikkei 225 Stock Average increased 0.3 percent today to 15,308.49, after its futures closed at 15,360 in Chicago yesterday.

“Japanese shares are rising as U.S. shares gained and also Nikkei 225 futures in Chicago closed higher,” said Naoki Fujiwara, Tokyo-based chief fund manager at Shinkin Asset Management Co., which oversees about 640 billion yen ($6.3 billion). “There are hopes the U.S. Federal Reserve will continue being conservative with tapering and that’s the underlying support. Japan is lacking in news, so the market may trade sideways for a while.”

U.S. Economy

Futures on the S&P 500 were little changed today. The measure advanced yesterday amid expectations the economy was recovering and as Monsanto Co. announced a $10 billion stock buyback plan.

Orders for business equipment in the U.S. climbed in May, a sign that corporate investment is helping revive the economy after a slump at the start of the year. Combined with more job gains, such data underscore the view of Federal Reserve policy makers that the economy is improving and in less need of monetary stimulus.

Other reports yesterday showed the U.S. economy shrank 2.9 percent in the first quarter, the most in five years, and durable-goods orders unexpectedly fell in May. Economists predict a gauge of personal spending today will show gains.

“The U.S. stock market closed a little higher so the Japanese market may be able to rise to the Nikkei 225 Chicago futures level, but after that it will become top-heavy and we may see some profit-taking,” said Mitsushige Akino, executive officer at Ichiyoshi Asset Management Co. “There are no catalysts for shares to gain, so we may see a gradual decline later.”

Rakuten Rises

Rakuten gained 2.9 percent to 1,309 yen, the most since May 26. The shares gained after Toyo Keizai magazine said the online shopping site operator is in talks with AirAsia to invest in a low cost carrier. Rakuten said it has nothing to unveil regarding the report at this time, and is not the source.

Yahoo Japan climbed 0.9 percent to 471 yen, the most in more than a week, after saying it will acquire KC Card’s credit card operations for 22.7 billion yen.

Dainippon Screen slid 2.3 percent to 470 yen, the most since May 8. Merrill Lynch initiated coverage on the stock with an underperform rating, and set its share price target at 400 yen.

The Topix jumped 9.6 percent from its May 21 low through yesterday, while the MSCI World Index advanced 3.1 percent. Prime Minister Shinzo Abe said deflation has ended and will be thwarted by new government policies designed to encourage business expansion.

The Topix traded at 1.2 times book value at today’s close compared with 2.7 for the S&P 500 and 1.9 for the Stoxx Europe 600 Index yesterday. Volume on the Japanese gauge was about 3.9 percent lower than the 30-day average today.

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