Japanese Shares Climb After Yen Drops on Fed Rate-Rise Bets

  • Currency capped third weekly decline against dollar on Friday
  • Traders see a two-thirds chance Fed will act by December

Japanese shares rose, supported by exporters, after the yen capped a third weekly decline against the dollar on bets the Federal Reserve will raise interest rates this year.

The Topix index rose 0.4 percent at the close in Tokyo after swinging during the session from a gain of as much as 0.6 percent to a 0.2 percent drop. The yen traded at 104.27 against the greenback after weakening from around 100 yen near the end of last month. The Japanese currency dropped 0.5 percent Friday as investors increased bets the Fed will raise U.S. borrowing costs. Fed Vice Chair Stanley Fischer speaks in New York Monday, after Chair Janet Yellen reiterated her call for measured rate increases following data Friday showing U.S. retail sales climbed the most in three months. 

SecurityPercent ChangePrice
Topix+0.4%1,352.56
Nikkei 225+0.3%16,900.12
Yen-Dollar-0.1%104.27

“Corporate export revenues may have weakened in the first half, but if the yen manages to maintain current levels, earnings may show signs of bottoming out,” said Shoji Hirakawa, chief global strategist at Tokai Tokyo Research Institute Co. in Tokyo. “U.S. retail sales figures turned out to be more solid than other previous consumer-related data.”

The Japanese currency tumbled about 3 percent during the past three weeks as traders put the likelihood of higher U.S. rates by December at 66 percent, up from 29 percent a month ago, according to futures data compiled by Bloomberg. They saw a 17 percent chance of a November increase. Futures on the S&P 500 slipped 0.3 percent following a 1 percent decline in the underlying equity gauge last week.

About two shares rose for each that fell on the Topix. Electrical-appliance makers rose 0.9 percent and car manufacturers advanced 0.7 percent. Utility companies fell 0.6 percent.

  • Japan Display Inc. surged 8.3 percent, leading gains on the Topix Electric Appliances Index. SMBC Nikko Securities Inc. raised its rating on the stock to outperform from neutral.

  • Tokyo Electric Power Co. slumped 7.9 percent, the biggest drop on the Nikkei 225 Stock Average. A candidate opposed to the restart of Tepco’s Kashiwazaki Kariwa nuclear plant won the gubernatorial race for Niigata prefecture, where the reactor is located, blurring the outlook for Japan’s largest power utility.

  • Aderans Co., a wig maker, soared 17 percent after the firm received a buyout offer that represents a 29 percent premium to the stock’s Friday closing price.

  • TSI Holdings Co., a manufacturer of men and women’s clothing, climbed 7 percent after the company reported 830 million yen ($8 million) in operating profit for the six months ended August, swinging from a loss of 422 million yen in the year-earlier period.

While parsing the latest Fed developments, investors in Tokyo will also turn their attention to earnings, with more than 350 Topix companies scheduled to post results next week as the quarterly reporting season begins in earnest. Japanese stocks are the worst performers among developed Asian markets this year, with the Topix down 13 percent as a resurgent yen buffets the nation’s major manufacturing companies.

“Many of the investors probably want to have a look at the earnings reports for Japanese companies, a lot of which will start being released next week, before pushing stock prices much higher,” said Masahiro Ichikawa a Tokyo-based senior strategist at Sumitomo Mitsui Asset Management Co.

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