Topix Rises to Seven-Year High as Yen Nears 120 After U.S. Data

Japanese stocks rose for a fifth day, with the Topix index closing at a seven-year high after data showed renewed momentum in the U.S. economic recovery and the yen touched its weakest since 2007. Carmakers advanced.

Toyota Motor Corp., which gets three-quarters of sales abroad, climbed 1.8 percent even as it widened a recall of some vehicles. Takata Corp. fell 3.3 percent after its largest customer, Honda Motor Co., turned to other companies to supply replacement parts for vehicles called back for faulty air bags and volunteered for a nationwide U.S. recall hours after Takata refused to do so. Honda climbed 2 percent.

The Topix added 0.8 percent to 1,440.60 in Tokyo, the highest close since December 2007. The Nikkei 225 Stock Average increased 0.9 percent to 17,887.21. The yen fell 0.1 percent to 119.90 per dollar. U.S. stocks closed at records on signs of progress in the labor market and service industries, while European shares gained ahead of a central-bank decision on monetary policy today.

“The U.S. economy is recovering as expected with higher stocks increasing a wealth effect and falling oil prices supporting consumption,” said Mitsushige Akino, executive officer at Ichiyoshi Asset Management Co. in Tokyo. “Stocks are being supported by expectations of continued global monetary support from the European and Japanese central banks.”

Japan’s currency has fallen 12 percent against the dollar this year, with losses extending after the Bank of Japan boosted stimulus on Oct. 31. In contrast, the Federal Reserve ended its third round of bond purchases in October amid a mounting recovery in the world’s largest economy.

Policy Divergence

The U.S. service industry expanded at the second-fastest pace since 2005, as falling gasoline prices and lower unemployment put consumers in a better position to spend, with the Federal Reserve’s Beige Book indicating “widespread” hiring across U.S industries and regions. The Fed’s report provides anecdotal evidence about improvements in the job market before policy makers consider on Dec. 16-17 when to raise interest rates for the first time since 2006.

Companies in the U.S. added 208,000 workers in November, indicating steady progress in the labor market, a private report showed. Payrolls have climbed by at least 200,000 in seven of the last eight months. The Labor Department releases its jobs data tomorrow. Companies probably added 230,000 nonfarm workers in November while the unemployment rate held at 5.8 percent, according to economists surveyed by Bloomberg.

Carmakers Climb

Auto companies rose. Toyota gained 1.8 percent to 7,730 yen, the highest close since July 2007. The company will recall an additional 190,000 vehicles in Japan and China, citing safety issues related to Takata air bags. Honda climbed 2 percent to 3,725 yen. Nissan Motor Co. added 1.7 percent to 1,120.5 yen.

Takata lost 3.3 percent to 1,331 yen. The U.S. National Highway Traffic Safety Administration told lawmakers there is no way the company can justify limiting the recall to only high-humidity states. Takata snubbed the regulator yesterday, refusing to expand replacements beyond about 8 million cars in such areas.

Fanuc Corp., a maker of factory robotics, rose 2.2 percent to 20,865 yen. Goldman Sachs Sachs Group Inc. increased the stock’s price target to 29,000 yen from 27,500 yen, citing an expected increase in demand for automation in China next year.

Hitachi Ltd. advanced 1.9 percent to 928.5 yen. Mitsubishi UFJ Morgan Stanley Co. lifted its outlook on the shares to 1,350 yen from 1,000 yen, saying it expects the appliance manufacturer to continue to post record profits amid restructuring efforts.

The Topix traded at about 15.9 times its estimated earnings, compared with 17.3 on the S&P 500 and 15.9 on the Stoxx Europe 600 Index. Volume on the Japanese measure was 13 percent lower than the 30-day average today.

Election Outlook

Japanese voters head for the polls on Dec. 14, with the focus on economic policies. Prime Minister Shinzo Abe’s coalition will exceed the 317 seats needed for a two-thirds majority in the lower house, the Nikkei newspaper reported, citing a survey. That would enable Abe’s government to override decisions by the less powerful upper chamber.

With none of the 54 economists in a Bloomberg News survey expecting any announcements on interest rate changes at the European Central Bank, the spotlight is on what ECB president Mario Draghi says after the meeting. Last month he announced that ECB committees have been tasked with the “timely preparation” of further measures that can be used if needed.

Futures on Standard & Poor’s 500 Index added 0.1 percent. The underlying measure climbed 0.4 percent yesterday, while the Dow Jones Industrial Average gained 0.2 percent, as both gauges posted all-time highs.

“We have a ‘Back to the Future’ theme,” said Sean Darby, Hong Kong-based chief global equity strategist at Jefferies Group LLC. “We have the sort of environment we had in the late 1990s, which tends to point us to a pretty good period in equities. Low bond yields, no inflation, commodity prices well behaved, and equities did quite well during that period.”

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