Bloomberg News

Topix Snaps Five-Day Loss Streak as Noda Calls Elections

November 15, 2012

Japan’s Topix Index (TPX) advanced the most in two months, rebounding from a five-day slide, amid speculation newly announced elections may put in power a party pushing for more central bank easing and stimulus spending.

Builders Kajima Corp. (1812) and Shimizu Corp. (1803) rose more than 6 percent after Prime Minister Yoshihiko Noda yesterday called for elections that polls show the opposition party is likely to win. Honda Motor Co. (7267) jumped 5.1 percent as the yen weakened, boosting the earnings outlook for the exporter. Sony Corp. (6758) plunged 8.9 percent after offering its first convertible bonds in almost a decade.

The Topix rose 2.1 percent, the most since Sept. 7, to 737.51 at the 3 p.m. close in Tokyo, with more than five shares advancing for each that fell. The Nikkei 225 Stock Average (NKY) gained 1.9 percent to 8,829.72. Volume on the measure was 33 percent above the 30-day average after the ruling party called for elections on Dec. 16.

“A government led by the Liberal Democratic Party is expected to win,” said Mitsushige Akino, who oversees about $600 million at Ichiyoshi Investment Management Co. in Tokyo. “Investors believe that will add pressure on the Bank of Japan to ease policy, and the government will adopt strong policies to get the economy out of deflation.”

The Topix has fallen 21 percent since the Democratic Party of Japan took power on Sept. 16, 2009. The Standard & Poor’s 500 Index of U.S. shares advanced 27 percent in the same period.

Inflation Target

Japanese shares added to gains and the yen weakened to a six-month low after opposition leader Shinzo Abe repeated a call for a central-bank inflation target of up to 3 percent. The Bank of Japan should cut its benchmark interest rate to zero or below, he said.

The next government will get a chance to reshape the central bank’s leadership, with Governor Masaaki Shirakawa’s term scheduled to end in April.

Honda Motor, a carmaker that gets about 80 percent of its sales abroad, jumped 5.1 percent to 2,465 yen. Canon Inc., the world’s biggest camera maker, climbed 4.6 percent to 2,549 yen.

The yen depreciated to as low as 80.92 per dollar today in Tokyo, compared with 79.53 at the close of stock trading yesterday. Against the euro, Japan’s currency weakened to 103.18 from 101.16. A weaker yen boosts overseas income at Japanese companies when repatriated.

Kajima, Japan’s top construction company by revenue, soared 6.4 percent to 232 yen. Shimizu surged 7.9 percent to 245 yen, while Obayashi Corp. (1802) jumped 6 percent to 369 yen.

“There’s speculation that a government led by the Liberal Democratic Party will increase public works and investment,” said Koji Toda, chief fund manager at Resona Bank Ltd. in Tokyo, which oversees about $75 billion. “That’s boosting construction and property companies.”

Developers Gain

Mitsubishi Estate Co., the country’s biggest developer by market value, advanced 3.3 percent to 1,612 yen. Mitsui Fudosan Co., the second-largest, increased 4.2 percent to 1,717 yen.

Futures on the S&P 500 added 0.1 percent today. The gauge lost 1.4 percent yesterday amid negotiations in Washington on a budget agreement needed to avoid the so-called “fiscal cliff.” More than $600 billion in automatic tax increases and spending cuts go into effect next year if Congress can’t strike a deal to cut debt.

Toho Zinc Co. (5707) surged 12 percent to 287 yen, the most in the Nikkei 225, after Mizuho Securities Co. recommended buying the shares. The opening of a new mine will help drive a “V-shaped” recovery in earnings, Mizuho said.

Sony lost the most in the Nikkei 225, falling 8.9 percent to 793 yen, the lowest since 1980, the year after introducing its Walkman. The electronics maker offered 150 billion yen ($1.9 billion) of zero-coupon convertible bonds maturing in five years with a conversion price of 957 yen. The proceeds will be used to fund acquisitions and expand imaging-sensor facilities, the company said in a statement.

To contact the reporters on this story: Norie Kuboyama in Tokyo at nkuboyama@bloomberg.net; Satoshi Kawano in Tokyo at skawano1@bloomberg.net

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


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