Japan Shares Rise for First Time in Eight Days as Banks Rebound

  • Investors awaiting monetary decisions next week from Fed, BOJ
  • Banks lead gains after declining for four straight sessions

BOJ and the Fed Keep Investors Guessing

Shares in Tokyo rebounded from their longest losing streak in 2-1/2 years as banks rose for the first time in five days ahead of Bank of Japan and Federal Reserve monetary policy meetings.

The Topix index pared its weekly drop to 2.4 percent by the close of trading Friday after U.S. equities gained amid receding expectations for an imminent U.S. interest-rate increase. Japanese stocks have been hampered recently as volatility returned amid prospects of a rate cut deeper into negative territory at home, while globally investors have become concerned central banks may be preparing to scale back their ultra-easy monetary policies.

SecurityPercent ChangePrice
Nikkei 225+0.7%16,519.29

“It’s really about adjusting - or cutting - existing positions; that’s what’s been going on all week,” said Hajime Sakai, a fund manager with Mito Securities Co. in Tokyo. “Making a move based on predictions of what will happen ahead of BOJ and Fed policy meetings is extremely difficult.” The Topix traded in a tight range of about 11 points on Friday.

Policy Meetings

Markets in Japan are closed for a national holiday Monday and resume trading Tuesday just ahead of the BOJ and Fed rate decisions Wednesday.

Traders put the odds of a U.S. rate increase next week at 18 percent, down from 22 percent at the start of the week, following soft economic numbers, according to futures data compiled by Bloomberg. Latest data from the U.S. showed industrial production shrank more than forecast, while retail sales unexpectedly fell.

Trading volume on the Topix was 12 percent above the 30-day average.

Banks contributed the most to the benchmark’s advance. Mitsubishi UFJ Financial Group Inc. ended 2.7 percent higher, while Sumitomo Mitsui Financial Group Inc. rose 2.2 percent. A gauge tracking lenders lost 7 percent over the past four days as a slew of media reports suggested the BOJ will probably cut rates. 

Eyes on BOJ

“There hasn’t been fresh talk that could reduce the odds of a rate cut, but banks were down significantly of late and expectations may be subsiding,” said Mamoru Shimode, chief equity strategist at Resona Bank Ltd. in Tokyo. “Nobody knows what the BOJ will ultimately do. What the BOJ highlights from its comprehensive assessment of monetary policy will be very important regarding minus interest rates.”

MUFJ’s main lending unit urged the BOJ to consider the side effects of negative interest rates at next week’s meeting, saying the policy will continue to squeeze lending income.

Automakers were the worst performers as Toyota Motor Corp., the world’s largest car manufacturer, fell 1.7 percent. The yen was little changed against the dollar after rallying 1.9 percent from a low on Sept. 2.

  • Apple Inc. suppliers advanced after the Cupertino, California-based company rallied to its highest since December in the U.S. amid growing optimism over the iPhone 7’s market reception. Japan Display Inc. soared 11 percent, while Alps Electric Co. jumped 6.3 percent and Murata Manufacturing Co. added 4.2 percent.

  • Nichiha Corp., a producer of ceramic exterior walls and fiberboards, surged 9.4 percent. The company raised its full-year operating profit target by 22 percent to 11.2 billion yen ($110 million).

  • Hokuhoku Financial Group Inc. climbed 5.2 percent after the company said it will cancel treasury stocks equal to 2.21 percent of its shares on Sept. 30.
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