Nikkei 225 Rises to Two-Month High as Yellen Comments Weaken Yen

Japanese shares advanced, with the Nikkei 225 Stock Average closing at the highest in two months, after Federal Reserve Chair Janet Yellen said the U.S. central bank could lift interest rates as soon as next month, driving the dollar higher against the yen.

Japan Post Holdings Co. and its banking and insurance units each rose on the day after their debuts, climbing at least 3.4 percent. Japan Tobacco Inc. jumped 6.8 percent after increasing its year-end dividend and profit forecast. Toshiba Corp. slumped 3.4 percent after saying, in response to a Nikkei newspaper report, that it expects to post a first-half operating loss of 90 billion yen ($741 million). Takata Corp. plunged 25 percent, falling by its daily limit on doubts about the air-bag maker’s survival.

The Nikkei 225 added 1 percent to 19,116.41 in Tokyo, the highest close since Aug. 28. The Topix index climbed 1 percent to 1,555.10, with food companies and shippers leading gains. The yen traded at 121.50 per dollar after weakening 0.4 percent yesterday following Yellen’s comments.

“The weaker yen is working in Japan’s favor,” said Tatsushi Maeno, head of Japanese equities at Pinebridge Investments Japan Co. in Tokyo. “Japan Post’s privatization is perhaps lifting sentiment and this is supporting prices. It’s hard to say exactly, but to me it feels like we’re picking up momentum.”

‘Live Possibility’

If economic data continue to point to growth and firmer prices, a December rate hike would be a “live possibility,” Yellen said on Wednesday in testimony before the House Financial Services Committee in Washington. Following the comments, futures traders pushed the odds of a rate hike at the Dec. 15-16 meeting to 56 percent from 50 percent a day earlier. The chance of a rate rise by the end of 2015 was 34 percent two weeks ago, prior to the Fed’s meeting in October.

Japan Post Insurance Co. surged 13 percent, bringing its two-day gain to 77 percent. Its parent company added 3.4 percent today, while Japan Post Bank Co. climbed 6.2 percent.

These are stocks people buy for keeps, “so in the future we probably won’t see such huge gains or big losses either,” said Mitsushige Akino, executive officer at Ichiyoshi Asset Management Co. in Tokyo. “At some point they will stop and not move much thereafter.”

Japan Tobacco

Japan Tobacco jumped 6.8 percent, the most since March 2013, providing the biggest boost to the Topix. The company increased its planned dividend per share for the year through December by 10 yen to 118 yen, and raised its net income forecast by 0.6 percent to 474 billion yen. Japan Tobacco said it sees continued profit growth in the medium to long term. The former Japanese monopoly has bought brands and products abroad to counter a shrinking population and stagnating smoking rate at home.

Toshiba lost 3.4 percent. The Nikkei reported earlier that the company would announce its first operating loss in six years. The company also said it expects net income for the six months ended September to be about 40 billion yen.

Takata Corp. tumbled by a record 25 percent after the loss of its biggest customer. Honda Motor Co. said it will discontinue using the company’s air-bag inflators in any new models under development and accused the supplier of manipulating test data.

“There’s very little chance for Takata to survive,” said Amir Anvarzadeh, Singapore-based global head of Japan equity sales at BGC Capital Partners Inc. “It’s a safety equipment maker killing people and lying about their issue.”

E-mini futures on the Standard & Poor’s 500 Index rose 0.1 percent after the underlying measure lost 0.4 percent on Wednesday as Yellen’s comments halted the U.S. equity rally and sent two-year Treasury yields to their highest level since 2011.

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