Japan Shares Recoup Brexit Losses on Fresh Stimulus Expectations

  • Topix index posts biggest three-day rally since Aug. 28
  • Prime Minister Abe ordered compilation of stimulus measures

What Can Japan Do to Boost the Economy?

Japanese shares extended a rally for a third day to recoup losses from the Brexit vote amid heightened expectations for fresh stimulus.

The Topix index rose 1.1 percent to 1,300.26 at the trading break in Tokyo, its biggest three-day gain since Aug. 28. The measure has now joined global equities to recover from its Brexit selloff. The yen rose 0.5 percent to 104.18 per dollar after the biggest two-day drop since 2014. Prime Minister Shinzo Abe ordered his economy minister to compile stimulus measures this month.

“We are up on speculation of more stimulus, and short covering from last month’s record levels of short selling,” said Andrew Clarke, Hong Kong-based director of trading at Mirabaud Asia Ltd. “The yen is slightly stronger at the moment so that is causing a little hesitation.”

Abe met with former Federal Reserve Chairman Ben S. Bernanke in Tokyo on Tuesday, with the Japanese premier underscoring his commitment to implementing fresh economic stimulus and saying he wants to speed up the nation’s exit from deflation.

“Helicopter Money”

The Sankei newspaper reported that government officials are considering “helicopter money” as a policy option. Chief Cabinet Secretary Yoshihide Suga denied the report and Abe adviser Koichi Hamada played down the idea of “helicopter money,” while saying boosting fiscal and monetary stimulus at the same time would be effective.

Japan may prove to be a “magnificent testing ground” if they decide to adopt “helicopter money” as a stimulus measure, said Chihiro Ohta, a senior strategist with SMBC Nikko Securities Inc.

The Nikkei 225 Stock Average added 0.8 percent to 16,231.43. Volume on the Topix was 37 percent higher than the 30-day average, as all but eight of its 33 industry groups advanced. The ratio of shares sold short on the Tokyo Stock Exchange fell to 39 percent of value traded on Tuesday, down from a record 47 percent on June 10.

  • Banks led gains among the Topix sectors. The Sankei report saying Japan is considering “helicopter money” has boosted market sentiment, and would be positive for banks, Deutsche Bank AG senior analyst Yoshinobu Yamada said.
  • Yamaha Motor Co. surged 9.8 percent after the operator of the Nikkei 225 said the motorcycle maker will replace Sharp Corp. on the equity measure. 
  • Nintendo Co. slid 4.4 percent after a 59 percent rally over four days spurred by the popularity of its mobile-game app Pokemon Go.
  • Carmakers were the biggest boosts to the Topix after the yen weakened, with Toyota Motor Corp. advancing 3.4 percent. 

In the U.S., the Dow Jones Industrial Average joined the S&P 500 Index to close at a fresh record, with U.S. equities climbing a third day as crude rallied and Alcoa Inc.’s results bolstered optimism on corporate earnings. Futures on the S&P 500 slid 0.1 percent on Wednesday.

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