Japanese Stocks Advance on Weaker Yen, U.S. Economic Outlook

  • Volume of Topix index remains near lowest level this year
  • New homes purchases in the U.S. surged to highest in 8 years

Japanese stocks rose for the first time in three days after the yen weakened, boosting the earnings outlook for exporters, and as U.S. housing data increased investor confidence that the world’s biggest economy can handle an imminent increase in borrowing costs.

The Topix index jumped 1.2 percent to 1,342.88 at the close in Tokyo as about three shares advanced for each that fell. The Nikkei 225 Stock Average climbed 1.6 percent to 16,757.35. The yen traded at 110.02 per dollar, holding losses after weakening 0.7 percent on Tuesday. Purchases of new homes in the U.S. surged in April to the highest level since the start of 2008. Trading volume on the Topix was 26 percent below the 30-day average, after hitting the lowest level this year on Tuesday.

“We could see a rate hike in either June or July,” said Chihiro Ohta, senior strategist at SMBC Nikko Securities Inc. “Although U.S. manufacturing isn’t exactly solid, jobs data is steadfast, supporting consumption and housing data. The U.S. increasing borrowing costs will also be positive for Japanese stocks through a stronger dollar.”

Electric-appliance makers and car builders were the biggest boosts to the Topix for a second day. Sony Corp. led gains on the Nikkei 225, rising 6.5 percent after announcing its annual profit forecast on Tuesday. The forecast missed analyst estimates on effects from the earthquake, but investors looked instead to the company’s long-term prospects.

“Even if there are effects from the earthquake, we’ve been able to confirm that it’s able to secure a certain level of profit,” said SMBC Nikko’s Ohta.

Asahi Group Holdings added 5.1 percent after Nomura Holdings Inc. raised its rating on the beverage maker to buy from neutral. Toyota Motor Corp. advanced 2.3 percent after the company announced it will invest in Uber Technologies Inc.

Traders have boosted the probability of higher U.S. interest rates next month to 34 percent, up from 4 percent last Monday. They’re now pricing in a better-than-even chance of a rate increase by July.

“The U.S. is coming closer to full employment, and there is underlying strength in the economy,” said Yoshinori Shigemi, a global market strategist in Tokyo at JPMorgan Asset Management. “We’re now starting to enter a virtuous cycle.”

Futures on the S&P 500 Index added 0.2 percent. The underlying U.S. equity gauge rose 1.4 percent on Tuesday, climbing the most in more than two months as financial and technology companies surged.

Prime Minister Shinzo Abe plans to announce a delay of the scheduled April 2017 sales tax hike after Japan’s Diet session ends June 1, the Yomiuri newspaper reported without providing attribution.

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