Japanese Shares Close at June High After Yen Extends Its Slide

  • Exporters buoy Topix after yen fell for seven straight days
  • Mood to stay positive for Japan stocks, Resona’s Shimode says

Japanese shares rose, with the benchmark equity measure at a four-month high, after the yen logged its longest losing streak since March as Federal Reserve officials continued to boost rate-increase expectations amid stronger economic data.

The Topix closed 0.5 percent higher in Tokyo on Thursday, rising for a fourth day to its highest since June 1. The Japanese currency held at 103.58 per dollar after a seven-day decline, its longest consecutive drop since the period ended March 28, after Chicago Fed President Charles Evans said that while a rate rise is mostly likely to take place in December, it could happen earlier. His comments came as data showed U.S. service companies grew at the fastest pace in almost a year in September.

SecurityPercent ChangePrice
Topix+0.5%1,353.93
Nikkei 225+0.5%16,899.10
Yen-Dollar-0.1%103.58

“The U.S. economy has been recovering even after it went ahead with a rate hike last December,” said Mitsushige Akino, an executive officer at Ichiyoshi Investment Management Co. “From the Fed’s point of view, two rate hikes would have been possible but they haven’t been able to hike due to overseas market conditions. A December hike will happen for sure.”

Exporters bolstered the Topix, with a measure tracking the country’s automakers extending this week’s ascent to 4.8 percent, its biggest such gain in more than a month. Electrical-appliance makers added 0.7 percent on Thursday, also rising for a fourth day. 

  • Fujitsu Ltd. surged 5.7 percent after a person familiar with the situation said the company is in talks with Lenovo Group Ltd. to sell a majority stake in its personal-computer business.
  • Sompo Holdings Inc. jumped 6.5 percent, the most on the Nikkei 225. The insurer said it has agreed to buy Bermuda-based Endurance Specialty Holdings Ltd. for about $6.3 billion in a bid to expand its business overseas.
  • ABC-Mart Inc. slumped 6.2 percent after the shoe retailer cut its full-year profit forecast. Goldman Sachs Group Inc. lowered its target price on the stock by 7.4 percent.

Futures on the S&P 500 Index were little changed. The underlying measure added 0.4 percent on Wednesday. With the Fed noting last month that the case for a rate increase had strengthened, key jobs numbers at the end of the week could bolster bets for higher borrowing costs, with the data forecast to show a pickup in hiring.

U.S. Data

The Institute for Supply Management’s non-manufacturing index, which covers an array of industries including retail and construction, increased to 57.1, the highest since October 2015 and beating market expectations.

“I would not be surprised, and if data continue to roll in as they have, I would be fine with increasing the funds rate once by the end of this year,” Evans, one of the policy-setting Federal Open Market Committee’s biggest proponents of keeping rates low, told reporters after a speech in Auckland, New Zealand, on Wednesday. The move “would most likely be December” but “could be the earlier meeting,” he said.

Federal Reserve Bank of Richmond President Jeffrey Lacker also stressed there is a strong case to raise rates more rapidly, reiterating his view from earlier this week that the Fed needs a rate hike to prevent a likely pickup in inflation. Traders put the odds of a rate hike as early as November at 24 percent, up from 15 percent on Sept. 27, according to futures data.

“If we see very solid jobs figures tomorrow, a November rate hike seems plausible,” said Mamoru Shimode, chief equity strategist at Resona Bank Ltd. in Tokyo. “The mood will stay positive for Japanese equities, with the 105 yen per dollar level just two-yen away on U.S. rate hike expectations.”

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