Japan Stocks Rise as Investors Weigh Sales-Tax Delay, Earnings

  • Nikkei says sales-tax hike to be postponed; government denies
  • Shiseido, Sumitomo Electric jump on strong earnings outlooks

Stocks in Tokyo rose after fluctuating throughout the day as investors weighed a report the government may delay a sales-tax hike and financial results from the peak of Japan’s earnings season.

The Topix index added 0.1 percent to 1,321.65 at the close in Tokyo after swinging between gains of 1 percent and losses of 0.2 percent. The index advanced 1.7 percent last week. The Nikkei 225 Stock Average climbed 0.3 percent to 16,466.40. The Nikkei reported on Saturday that Prime Minister Shinzo Abe will postpone a planned sales tax increase. Friday marked the peak of Japan’s earnings season, with more than a fifth of the Topix’s companies reporting results, many of them after the market closed.

“Not raising the sales tax means, in other words, that the economy is bad,” said Tomomi Yamashita, a fund manager at Shinkin Asset Management Co. “Company forecasts on the whole are indicating profit growth of about 10 percent, which isn’t bad. There isn’t as much fear of stocks dropping sharply, but there’s also not enough energy to push them higher. It’s not enough to rely on government support alone.”

The Nikkei said on Saturday that Abe will likely postpone the sales tax hike and will probably make his decision public after the G-7 Summit at the end of this month. The government denied the report on Sunday, according to NHK.

Of the 432 firms to have reported this season for which Bloomberg has analyst estimates, 38 percent exceeded profit expectations, worse than the 51 percent that beat forecasts in the previous quarter. Sales were better, with 44 percent coming in above estimates, up from 40 percent last quarter.

Earnings Season

Cosmetics firm Shiseido Co. surged 9.9 percent after raising its net-income forecast on better sales to tourists visiting Japan. Sumitomo Electric Industries Ltd. jumped 14 percent after saying operating profit will climb 12 percent this fiscal year.

Japan Post Bank Co. fell 2.4 percent after saying revenue will shrink 5.3 percent this fiscal year. Its sister company Japan Post Insurance Co. dropped 1.6 percent after also saying revenue would fall 12 percent in the period.

Tire makers led losses among the Topix’s 33 industry groups, led by Toyo Tire & Rubber Co. which plunged 19 percent, the most since 2009. The company cut its net-income forecast by 20 percent, blaming it on the stronger yen and a one-time loss related to its manipulation of earthquake products data.

Electronics maker Hitachi Ltd. added 3.7 percent despite saying operating profit will contract to levels below those estimated by analysts. Efforts to overhaul its businesses and re-accelerate margin improvements are a positive, Nomura Holdings Inc. analyst Masaya Yamasaki wrote in a report.

Futures on the Standard & Poor’s 500 Index rose 0.1 percent after the underlying gauge dropped 0.9 percent to a one-month low on Friday. Data showed U.S. retail sales in April increased by the most in a year, re-igniting speculation the Federal Reserve may raise interest rates this year.

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