Japan Stocks Gain as Toyota Leads Exporters Higher on Weaker Yen

  • Yen declined 1.1% on Friday after American jobs report
  • Olympus surges on earnings, Asics falls as profit forecast cut

Japanese stocks advanced, driven by exporters and banks, as the yen weakened against the dollar after a better-than-expected U.S. jobs report increased speculation that the Federal Reserve will raise interest rates next month.

Toyota Motor Corp. and the three lenders known as the nation’s megabanks were among the biggest boosts to the Topix index, which rose 1.8 percent in Tokyo to close at its highest level since Aug. 20. The measure’s up 16 percent from an eight-month low at the end of September. The yen touched an 11-week low of 123.48 per dollar after the best monthly U.S. employment report of the year pushed odds for a December interest-rate hike to 68 percent.

“It’s likely we will see the yen weaken to mid-124 yen to the dollar because of the different directions of the U.S. and Japan’s interest rates,” said Shoji Hirakawa, chief equity strategist at Okasan Securities Co. in Tokyo. That “will bring big advantages to Japanese exporters. The effect of the Chinese economy’s slowdown looks like it will be limited, and it’s almost certain that the Federal Reserve will hike interest rates in December.”

BOJ Waits

The Bank of Japan has refrained from adding to unprecedented monetary easing for more than a year, while the prospect of higher U.S. borrowing costs draws nearer. A weaker yen since Prime Minister Shinzo Abe came to power in 2012 has helped fuel a boom in corporate earnings at firms that repatriate money from overseas.

Volume on the Topix was 12 percent higher than the 30-day average as the measure rallied to close at 1,590.97. The Nikkei 225 Stock Average climbed 2 percent to 19,642.74. Toyota which gets 78 percent of its auto sales abroad, added 1.6 percent. Olympus Corp. surged 17 percent, the most in 2 1/2 years, after profit at the medical-systems maker topped estimates. Vitec Holdings Co. Ltd. was among the largest declines on the Topix, slumping 12 percent, after the maker of electronics cut its earnings outlook.

Toyota's correlation to yen/dollar soars as yen weakens

American employment in October jumped by the most this year, wage growth accelerated and the jobless rate fell to 5 percent, data showed Friday. It came after Fed Chair Janet Yellen said she sees the economy firming and officials are prepared to raise their target rate as soon as December.

Close Decision

The U.S. economy has reached at least one measure of full employment and the decision to keep interest rates near zero in October was a close one, John Williams, president of the Federal Reserve Bank of San Francisco, said at the weekend. He told reporters later that he’s waiting to see incoming data before making predictions about a rate increase at the Dec. 15-16 Fed meeting in Washington.

Bank of Japan Governor Haruhiko Kuroda said last week he didn’t see limits to his options for further stimulus, already at record levels, prompting investors to speculate that any extra measures will involve project notes, local debt or equities.

Data released at the weekend showed Chinese exports fell 6.9 percent in October from a year earlier, a bigger drop than any of the 31 economists surveyed by Bloomberg had estimated. Imports also were weaker than expected, sinking 18.8 percent after analysts tipped a drop of 15.2 percent. The trade surplus swelled to a record $61.6 billion.

December Increase

“Strong U.S. jobs data for October supports the case for a December Fed rate hike,” said Shane Oliver, Sydney-based strategist at AMP Capital Investors Ltd., which oversees about A$156 billion ($110 billion). “The Fed is unlikely to do anything to threaten global growth and this in turn should help see the global economic recovery continue. As such, share markets are likely back in a broad rising trend.”

E-mini futures on the Standard & Poor’s 500 Index added 0.1 percent after the underlying gauge posted its sixth weekly advance.

Toshiba Corp. sued three former presidents as the maker of personal computers and power plants tries to recover from accounting irregularities that have led to profit writedowns of more than $1.2 billion over almost seven years. Its shares dropped 7.5 percent.

Profit reports were the other main driver of stock prices Monday. Some 51 percent of those companies that have reported results this earnings season and for which estimates are available have topped estimates, according to data compiled by Bloomberg.

Phone Profit

Nippon Telegraph & Telephone Corp., the country’s biggest fixed-line phone company, surged 4.2 percent after raising its profit forecast. Asics Corp tumbled 18 percent as the sportswear maker cut its full-year operating profit forecast.

Toray Industries Inc. climbed 3.5 percent after signing an agreement with
Boeing to supply carbon fiber for at least another 10 years, extending a supply
deal that was first signed in 2005.

Mitsubishi UFJ Financial Group Inc. was among the leading gains for banks, rising 4.3 percent. Sumitomo Mitsui Financial Group Inc. advanced 4 percent and Mizuho Financial Group Inc. jumped 3.1 percent.

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