Japanese Shares Gain as Exporters Boost Gauge After Yen’s Slump

  • Autos, electrical appliance makers contribute most to Topix
  • Topix tops its 200-day moving average for first time in 2016

Japanese shares rose for a third day, buoyed by exporters, after the yen fell by the most in almost six weeks following hawkish remarks from U.S. Federal Reserve officials.

The Topix index rose 0.5 percent on Wednesday to close above its 200-day moving average for the first time this year. The yen traded at 102.98 per dollar after sliding 1.2 percent on Tuesday, the most since Aug. 26. Federal Reserve Bank of Richmond President Jeffrey Lacker on Tuesday urged the U.S. central bank to hike rates to ward off a likely pickup in inflation that would force bigger increases later. His comments came hours after Federal Reserve Bank of Cleveland President Loretta Mester said the economy is ripe for an interest-rate increase.

SecurityPercent ChangePrice
Topix+0.6%1,347.81
Nikkei 225+0.5%16,819.24
Yen-Dollar-0.1%102.98

“A December rate hike seems almost certain, and it sounds like that may be followed by two more rate hikes next year instead of one,” said Chihiro Ohta, a Tokyo-based senior strategist at SMBC Nikko Securities Inc. “The yen’s weakness against the dollar, triggered by mounting U.S. rate hike expectations, is good for Japanese stocks as it alleviates concern over how far the recent strength in the yen will go.”

The yen has risen 17 percent against the dollar this year amid concern over the effectiveness of the Bank of Japan’s policies to shore up the economy and as investors pared back expectations for a Fed rate hike. The Topix is down 13 percent in 2016, poised for its first annual decline since Prime Minister Shinzo Abe took office in December 2012 with a pledge to boost growth.

Exporters of cars and electrical appliances were the biggest contributors to the Topix’s ascent, with Toyota Motor Corp. climbing 1.5 percent and Panasonic Corp. adding 1.7 percent.

  • Hitachi Ltd. jumped 6.4 percent to be among the biggest gainers on the Nikkei 225. The company is looking to sell power-tool maker Hitachi Koki Co. for more than 50 billion yen ($486 million), with the Carlyle Group among those interested, the Nikkei newspaper reported. Hitachi Koki advanced 11 percent.
  • Chiyoda Co., which operates shoe-store chains and clothing shops, dropped 7.3 percent. The company lowered its full-year profit forecast by 33 percent after reporting weaker-than-expected results for the first half.
  • Tokyo Electric Power Co. fell 3.3 percent after its president said the utility will face insolvency should it recognize the cost of shutting down the damaged Fukushima nuclear plant all at once.
  • Drugmakers, which rallied on Tuesday after biologist Yoshinori Ohsumi won a Nobel Prize in medicine, slumped. Takara Bio Inc. fell 2.5 percent, while Cosmo Bio Co. shed 11 percent and Medical & Biological Laboratories Co. slipped 6.3 percent.

The Topix’s gain on Wednesday comes even amid concern global central banks are readying to pare stimulus. Bloomberg News reported the European Central Bank is likely to gradually taper asset purchases as it ends quantitative easing, citing officials who asked not to be identified.

Futures on the S&P 500 Index were little changed. The underlying equity gauge fell 0.5 percent on Tuesday. The Fed’s Mester also said “the case would remain compelling” for a rate hike at the Fed’s November meeting, despite its proximity to the U.S. presidential election. Investors saw a 61 percent chance of the Fed raising rates in December on Tuesday, up from 50 percent a week earlier.

“As long as the decline in U.S. stocks remains minimal, growing expectations for a U.S. rate hike will work in favor of Japanese shares by weakening the yen against the dollar,” said Masahiro Ichikawa a Tokyo-based senior strategist at Sumitomo Mitsui Asset Management Co. “Still, it’s unlikely for the Nikkei 225 to leap toward the 17,000 mark ahead of such an important data release as the U.S. jobs due Friday.”

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