Japanese Shares Gain After Yen Weakens Following U.S. Jobs Data

Is the Japanese Stock Recovery in Danger of Stalling?

Japanese shares rose the most in about a month, after data showed U.S. jobs beat economists’ estimates, boosting risk appetite and weakening the yen.

The Topix index climbed 2 percent to 1,305.53 at the close in Tokyo, its biggest gain since July 12, with all but one of the 33 industry groups advancing. The Nikkei 225 Stock Average added 2.4 percent. U.S. payrolls climbed by 255,000 last month, exceeding economists’ forecasts for an increase of 180,000, indicating renewed vigor in the U.S. labor market that will provide support for consumer spending. The yen slid 0.2 percent to 102.05 per dollar after dropping 0.6 percent on Friday.

“A possible pullback in U.S. jobs figures had kept some on guard, and the latest data have quenched those concerns,” said Hitoshi Asaoka, a senior strategist with Mizuho Trust & Banking Co. “It does leave room for a rate increase within this year, but that will be offset by the impact on the yen, which will in turn support Japanese stocks.”

Investors have been closely watching economic data from the U.S. to better gauge the chances of a rate hike later this year. Odds of an interest rate increase in September rose to 26 percent, up from 18 percent before the jobs report.

Banks, carmakers and electric-appliance manufacturers boosted the Topix the most, as about three shares rose for each that fell.

  • Machinery maker Fanuc Corp. jumped 3.8 percent, while Toyota Motor Corp. added 3.3 percent. 
  • Mitsubishi UFJ Financial Group Inc., Japan’s biggest lender, climbed 5.4 percent, the biggest boost to a gauge tracking banks.
  • Japan Display Inc. lost 6.5 percent. The panel maker reported wider than expected losses in its preliminary first-quarter results.

Futures on the S&P 500 Index were little changed. The underlying measure rallied 0.9 percent on Friday on signs U.S. hiring remains robust, while technology companies pushed the Nasdaq Composite Index to its first record close in a year on solid earnings results.

The recovery in Japanese stocks in 2016 has been slower than in other Asian markets, with the Topix down 16 percent this year. The benchmark measure lost 3.2 percent last week amid disappointment about the Bank of Japan’s decision on monetary policy at the end of July and the government’s latest round of fiscal stimulus. While the central bank almost doubled exchange-traded-fund purchases to 6 trillion yen, it kept its monetary base and negative interest rate program unchanged. The Topix now trades at 13 times estimated earnings, lower than in the U.S. and Europe.

“The Japanese stock market has been stagnant mainly because of uncertainties surrounding the Bank of Japan’s monetary policy,” said Soichiro Monji, general manager for the economic research department at Daiwa SB Investments Ltd. The latest U.S. economic data has encouraged buying in Japanese stocks on the view that shares are undervalued, he said.

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