Japanese Stocks Rise as U.S. Rate Hike Outlook Weakens Yen

  • Topix caps second weekly gain to close at highest since April
  • Volume low ahead of weekend and a Group of Seven meeting

BOJ Intervention: Will It Really Weaken the Yen?

Japanese stocks rose for a second straight week, closing at the highest level since last month, as investors anticipated a potential U.S. rate increase in June would lead to a weaker yen, aiding profits at exporters.

The Topix index added 0.5 percent to 1,343.40 at the close in Tokyo, the highest since April 27. The index gained 1.8 percent this week. The Nikkei 225 Stock Average advanced 0.5 percent to 16,736.35. The yen traded at 110.21 per dollar, weakening for a fourth day in five. The currency has lost 1.5 percent this week on expectations the Federal Reserve may raise interest rates next month.

"There are risks still but there are also positives," Takashi Hiroki, chief strategist at Monex Securities in Tokyo, said by phone. "Going forward we may see some talk of production cuts at the OPEC meeting, strength in the dollar, weakness in the yen from the U.S. rate hike, and talk of additional easing from the Bank of Japan meeting."

The Fed’s hawkish commentary in meeting minutes released Wednesday has bolstered the dollar against the yen. Two Fed presidents on Thursday said the central bank is moving closer to raising rates at one of its next two meetings.

Traders now see a 28 percent chance of higher borrowing costs next month, up from 4 percent at the start of this week. Odds for a move by July are 47 percent, while an increase by September is seen as having a 58 percent chance.

Exporters were mostly higher on the weaker yen. Toyota Motor Corp. added 1.2 percent, the most in almost two weeks. Electronics maker TDK Corp., which gets more than 90 percent of revenue abroad, climbed 2.1 percent.

Turnover on the Topix was 15 percent below the 30-day average and 19 percent lower for blue chips in the Nikkei 225. The TSE Mothers Index of small caps rose 1.2 percent, paring its weekly decline to 10 percent, the most since February.

Futures on the S&P 500 Index gained 0.3 percent after the underlying U.S. gauge fell 0.4 percent on Thursday, closing at its lowest since March 28. Equities pared losses in an afternoon comeback as a dollar gauge trimmed its climb.

G7 in Japan

Finance ministers from the Group of Seven economies have gathered in northeastern Japan to discuss the global economy. Chances of a major, coordinated policy announcement remained low given the recent relative stability in global markets and disagreements between member nations on fiscal prudence.

Teijin Ltd. jumped 3.8 percent after Nomura Holdings Inc. raised its rating on shares of the chemicals maker, citing strength at its pharmaceutical division. Ushio Inc., which makes optical equipment, slumped 3.7 percent after Mitsubishi UFJ Morgan Stanley Securities Co. cut its rating, saying growth will remain slow until the company can push through reforms.

Rubber product-makers led losses in Tokyo, with tiremaker Bridgestone Corp. losing 2.5 percent.

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