Japan Stocks Climb to Highest Since May as Yen Boosts Exporters

  • Yen falls against dollar after strong U.S. manufacturing data
  • JR Kyushu debuts on the Tokyo exchange after $4 billion IPO

Japanese shares rose to an almost five-month high as the yen weakened against the dollar, boosting the outlook for exporters’ profits at the start of the corporate earnings season.

The Topix index gained for a second day, closing at the highest since May 31, as the Japanese currency weakened after a U.S. index of manufacturers bolstered the case for higher U.S. interest rates this year. Investors are sifting through earnings to gauge the health of Japanese firms, with more than 350 companies on the Topix set to report this week. Precision-motor maker Nidec Corp. raised its full-year net-income target on Monday, beating analyst estimates.

“With the U.S. economy looking solid and a rate hike by year-end looming in investors’ minds, the yen is weakening, and boosting expectations for a recovery in earnings in the second half of the year,” said Toshihiko Matsuno, a senior strategist at SMBC Friend Securities Co. in Tokyo. Nidec’s earnings “reinforce the view that exporters’ earnings aren’t too bad.”

SecurityPercent ChangePrice
Topix+0.7%1,377.32
Nikkei 225+0.8%17,365.25
Yen-Dollar-0.4%104.58

The U.S. flash manufacturing purchasing managers’ index for October rose to 53.2 in September, beating estimates and boosting bets the Federal Reserve will raise interest rates by December. Higher borrowing costs in the U.S. and the Bank of Japan’s switch of focus to controlling the government bond yield curve could help the yen weaken to 110 yen to 120 per dollar by the end of 2017, according to Takashi Maruyama, chief investment officer of Fidelity International in Japan. Traders were pricing in a 71 percent chance of a U.S. rate increase by the end of the year as of Monday.

Kyushu Railway Co. surged as much as 20 percent on its trading debut in Tokyo following a 416 billion yen ($4 billion) initial public offering this month. The IPO is the nation’s largest rail share sale in more than a decade, and with more than three-quarters of the shares sold domestically, is part of Prime Minister Shinzo Abe’s efforts to encourage citizens to invest their household savings in the stock market.

The 25-day Toraku Index, which compares the numbers of advancing and declining stocks on the Japanese benchmark gauge, rose to 136.27 on Monday, its highest level in almost a year.

Exporters including electric-appliance producers and carmakers were the biggest boosts to the Topix, with Mazda Motor Corp. adding 2.9 percent and Nidec surging 6.1 percent. Banks were also among the biggest contributors to gains in the Topix, with Mitsubishi UFJ Financial Group Inc. rising 2 percent.

  • Shionogi & Co. climbed 3.6 percent after the drugmaker posted half-year operating profit that beat its forecast.  

  • IHI Corp. sank 9.6 percent after the heavy-machinery manufacturer slashed its net income forecast to break-even and canceled dividends.

  • Riken Technos Corp. advanced 3.6 percent after the synthetic-resin seller said it will buy back as much as 1.8 billion yen of its shares.

  • JSR Corp. declined 5 percent after the synthetic rubber manufacturer cut its operating profit forecast below analyst estimates.

  • ST Corp. added 5 percent after the household-products maker announced half-year operating profit that beat its forecast as sales increased.

  • Hitachi Kokusai Electric Inc. advanced 4.1 percent after Bloomberg News reported
    ASM International NV is weighing a bid for a controlling stake in the semiconductor equipment maker, according to people familiar with the matter.

Futures on the S&P 500 Index rose 0.1 percent. The underlying equity gauge advanced 0.5 percent Monday as deal activity encouraged investors, while T-Mobile US Inc. surged on better-than-estimated results.

“With some positive manufacturing data coming out from the U.S., there’s a sense of security toward where we’re going,” said Yoshihiro Okumura, a general manager at Chibagin Asset Management Co. in Tokyo. “If the yen remains at around current levels, there’s no need to be overly worried about domestic earnings.”

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