Bloomberg News

Japan Stocks Gain Most This Month on Government Plan for Tepco

June 14, 2011

June 14 (Bloomberg) -- Japanese stocks rose, sending the Nikkei 225 Stock Average to its biggest gain this month, after the government approved a bill to help Tokyo Electric Power Co. compensate victims of the Fukushima nuclear accident and China’s factory output increased more than expected.

Tokyo Electric, owner of the crippled Fukushima Dai-Ichi nuclear plant, led gains on the Nikkei, surging 25 percent. Chubu Electric Power Co. rose 13 percent after a report the utility and Marubeni Corp. may win an order for a gas-fired power plant in Oman. Fanuc Corp., an industrial robot maker that gets about 50 percent of its sales in Asia, rose 1.7 percent.

The Nikkei 225 Stock Average rose 1.1 percent to 9,547.79 at the 3 p.m. close of trading in Tokyo, extending gains after Financial Services Minister Shozaburo Jimi said the government will provide loan guarantees to ensure Tokyo Electric is able pay reparations following the worst nuclear accident in 25 years.

“The government is making some progress on a plan for dealing with Tokyo Electric,” said Yoshihiro Ito, chief strategist at Okasan Online Securities Co. in Tokyo. “Until now there’s been no positive news on the utility.”

The broader Topix advanced 1.3 percent to 822.86 after economic reports in China showed demand in Japan’s biggest export market is still driving up prices amid measures to restrain inflation. China’s consumer prices rose at the fastest pace in almost three years in May and industrial production increased 13.3 percent, exceeding a median 13.1 percent forecast. Investment in fixed assets also quickened, according to statistics bureau data released in Beijing today.

Fanuc, Komatsu

Fanuc rose 1.7 percent to 12,350. Komatsu Ltd. a maker of construction equipment that gets about a quarter of its sales in China, advanced 1.3 percent to 2,319 yen.

Stocks also gained after the Bank of Japan unveiled a 500 billion yen ($6.2 billion) loan program to help the country’s earthquake-hit economy recover. The move is the central bank’s latest effort to protect the world’s third-largest economy following the March 11 earthquake and tsunami that damaged Tokyo Electric’s nuclear plant, disrupted supply chains and left almost 24,000 people dead or injured.

Central bank governor Masaaki Shirakawa and his policy board today also kept the benchmark overnight rate unchanged in a range of between zero percent and 0.1 percent and left unchanged its 30 trillion yen lending program and 10 trillion yen asset-buying program.

Recovery Budget

Separately, Japan’s Finance Minister Yoshihiko Noda said today the prime minister asked him to compile a new stimulus budget next month to help prop up the economy. The spending plan will include payments to local authorities and assistance for disaster victims with loans, Prime Minister Naoto Kan told lawmakers.

The Topix has fallen 12 percent since March 10, the day before the earthquake disaster. The slump has driven down the price of stocks on the gauge to 1.2 times book value, compared with 2.14 on the Standard & Poor’s 500 Index of U.S. stocks and 1.56 on the Stoxx Europe 600 Index. ???“Some investors are thinking that, at this level, it might be the right time to buy,” said Hisakazu Amano, who helps oversee the equivalent of $29 billion at Tokyo-based T&D Asset Management Co.

Utilities led gains among Japanese stocks. Tokyo Electric, which has lost about 90 percent of its market value since the March disaster, gained the most since at least 1974. The utility climbed by its daily limit of 50 yen, or 25 percent, to 249 yen after the government said Japan will guarantee loans by banks to a third-party organization established to ensure the utility can compensate victims of the nuclear accident.

Tepco, as the utility is known, also got a boost after the Tokyo Stock Exchange today raised the collateral requirement for short sales of the shares to 50 percent from 30 percent. The move discouraged speculators by making the trade more expensive.

Chubu Electric, Japan’s No. 3 utility by revenue, soared 13 percent to 1,307 yen after the Nikkei newspaper reported that the utility and trading company Marubeni are close to winning an order to build and operate a power plant in Oman. The total cost of the project is $1.5 billion, the report said.

--With assistance from Satoshi Kawano in Tokyo. Editors: Jason Clenfield, John McCluskey.

To contact the reporter on this story: Norie Kuboyama in Tokyo at nkuboyama@bloomberg.net.

To contact the editor responsible for this story: Nick Gentle at ngentle2@bloomberg.net.


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