Japan Stocks Rally Most in Seven Weeks on Quake Stimulus Outlook

  • Crude rises first time in five days, boosting energy stocks
  • Firms impacted by the Kumamoto earthquake recover losses

Japanese stocks rose by the most in seven weeks, rebounding from a rout on Monday, as investors speculated the central bank may boost stimulus in the wake of a deadly earthquake and as oil gained for the first time in five days.

The Topix index climbed 3.3 percent to 1,363.03 at the close in Tokyo, the most since March 2, to erase Monday’s 3 percent loss. The Nikkei 225 Stock Average jumped 3.7 percent to 16,874.44 as volatility on the gauge declined after spiking 16 percent yesterday. The Dow Jones Industrial Average closed in New York at its highest since July 20 as oil pared losses that on Monday sparked a 1.5 percent drop in the MSCI Asia Pacific Index on Monday.

“Things look terrible for Kumamoto in the short-term, but we’ll likely see more relief aid and stimulus to help them. It’s unlikely the Japanese economy will be hurt a lot from this,” said Kazuhito Suzuki, senior strategist at Shinkin Asset Management. “There was a knee-jerk element to yesterday’s move, but as U.S. and European stocks were solid, today we’re seeing a sense of relief power a rebound.”

Investors continued weighing the economic fallout from Thursday’s earthquake in Kumamoto and subsequent aftershocks in southwestern Japan that killed 44 people and left more than 1000 injured. The quake forced the closure of factories at companies such as Sony Corp. and Toyota Motor Corp., with one report estimating the automaker’s operating profit may decline by as much as 30 billion yen ($274 million). The region’s tourism is also suffering as Korean and Chinese tour agencies and airline carriers canceled tours and flights.

Partial Rebound

Shares of some companies which halted operations after the earthquake partially recovered Monday’s losses. Chipmaker Renesas Electronics Corp. rose 6.8 percent to pare Monday’s loss of 12 percent, while HIS Co., which operates a theme park in the area, added 5.4 percent after dropping 12 percent on Monday. Sony surged 6.5 percent, the most in two months, as concerns eased about its plant closing in the area.

Speculation the BOJ may boost stimulus to combat economic fallout from the quake weakened the yen for a second day, with it trading at 108.95 per dollar. Exporters Honda Motor Co. jumped 4.5 percent and Mazda Motor Corp. surged 7.2 percent.

BOJ Governor Haruhiko Kuroda said on Saturday it is hard to assess the economic impact of the earthquake and that he will monitor it closely. Prime Minister Shinzo Abe said on Monday in parliament he would consider speeding up a transfer of tax revenues to local governments and using surplus budget funds in response to the quake.

Anxiety over the Kumamoto earthquake “is leading to expectations of further easing from the Bank of Japan. That stopped the yen’s gains against the dollar,” said Toshihiko Matsuno, chief strategist at SMBC Friend Securities Co. in Tokyo.

Research Deals

Robotic suit-maker Cyberdyne Inc. jumped 7.1 percent after striking a research deal with a medical research agency. Sosei Group Corp. soared 18 percent after entering a pact with a London-based Kymab Ltd. to research antibody therapeutics. Shares of the Japanese drugmaker are up 151 percent this year.

Futures on the Standard & Poor’s 500 Index added 0.2 percent after the underlying gauge gained 0.7 percent on Monday as oil pared losses. The index is trading at its highest level since Dec. 1 as it heads into a week where more than 90 companies are scheduled to report earnings, including Goldman Sachs Group Inc.

After slumping on the failure of large oil producers to reach agreement to curb output, crude futures rebounded 1.1 percent to $40.19 a barrel Tuesday after a labor strike in Kuwait, OPEC’s fourth-biggest member, cut production for a second day.

Energy explorers in Japan rose, with Inpex Corp. jumping 2.9 percent and Japan Petroleum Exploration adding 1.8 percent.

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