Japanese Stocks Close Higher as Abe Dissolves Parliament

Japanese stocks rose, with the Topix index reversing declines in the last hour of trading, as Prime Minister Shinzo Abe dissolved parliament ahead of elections.

Paper makers and oil explorers led gains among the Topix’s 33 industry groups. Takata Corp., a maker of airbags linked to deaths of motorists, jumped 9.2 percent after leveraged short-selling of the stock was suspended. Mazda Motor Corp., which gets 31 percent of revenue from North America, fell 0.6 percent, paring declines of as much as 2.8 percent.

The Topix rose 0.2 percent to 1,400.18 at the close of trading in Tokyo, reversing losses of as much as 0.9 percent. The measure finished the week down less than 0.1 percent after four weeks of gains. The Nikkei 225 Stock Average added 0.3 percent to 17,357.51 today, erasing a 1.1 percent drop. The yen rose 0.4 percent to 117.73 per dollar after Finance Minister Taro Aso said the currency’s decline this week to the weakest level since August 2007 had been too fast. Japan’s market is shut on Nov. 24 for a public holiday.

“Investors entered an election mood, which triggered the market to reverse losses after shares were being sold ahead of a three-day holiday and Aso’s comments on the yen,” said Yoshihiro Ito, chief strategist at Okasan Online Securities in Tokyo. “There’s expectations for the market to gain during elections based on prior experiences.”

Abe dissolved the lower house of parliament today ahead of a December election, scuppering plans for a second increase in Japan’s sales tax as he tries to salvage his reform program after data this week showed Asia’s second-largest economy is in recession. In contrast, house-price and manufacturing reports yesterday signaled strength in the U.S. economy.

Election Gains

Japanese stocks tend to rise after elections are called. In 11 elections since 1980, the Topix index has posted average total return of 3.1 percent between the dissolution of parliament and the vote, according to data compiled by Bloomberg and Daiwa Securities Group Inc.

“It’ll be interesting to see how it plays out as politicians are likely to start getting vocal,” said Stan Shamu, a markets strategist in Melbourne at IG Ltd., wrote in an e-mail to clients.

Abe will delay raising the consumption levy originally planned for next October by 18 months. The vote will be held on Dec. 14, Aso posted in a statement on his website yesterday.

The Topix Pulp & Paper index gained 2.2 percent, leading gains on the broader gauge’s industry groups. Nippon Paper Industries Co. added 4 percent to 1,759 yen. Inpex Corp., Japan’s biggest oil explorer, added 2.2 percent to 1,414.5 yen, leading gains on the Topix Mining Index.

Takata Rebounds

Takata, which plunged 23 percent this month through Nov. 19, gained 9.2 percent today to 1,252 yen, extending yesterday’s 4.4 percent advance. New margin short sell trades for Takata shares on the Tokyo Stock Exchange were suspended by the Japan Securities Finance Co., according to data compiled by Bloomberg.

Carmakers were the biggest drag among the Topix industry groups even after paring declines. Nissan Motor Co. dropped 1.1 percent to 1,076.5 yen after falling as much as 2.4 percent earlier. Toyota Motor Corp., the world’s biggest carmaker, slipped 0.1 percent to 7,089 yen, paring a 1.2 percent loss. Mazda sank 0.6 percent to 2,961 yen.

The Topix gained the past four days as Abe called the poll and the Bank of Japan kept a pledge to expand the monetary base at an annual pace of 80 trillion yen ($676 billion). In the U.S., policy makers weighed their commitment to holding key rates near zero for a “considerable time,” according to minutes of the Fed’s October review.

Japan Rally

The Topix has nearly doubled since November 2012, with investors in Japanese stocks about $1 trillion richer, as policies of Abe and the BOJ weakened the yen and spurred inflation. The measure is up 19 percent from an Oct. 17 low after the central bank added to quantitative easing, and the nation’s $1.1 trillion pension fund pledged to buy more shares and amid speculation Abe wouldn’t go through with the tax increase.

The Standard & Poor’s 500 Index rose 0.2 percent to a record yesterday. Futures on the measure added 0.1 percent today.

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