Bloomberg News

Japan Topix Rises Sixth Day on Bets Yen to Boost Earnings

April 10, 2013

Japanese stocks rose, with the Topix (TPX) Index capping its longest win streak this year, on optimism the yen’s weakness will improve the earnings outlook for exporters.

Exporters to Europe Nintendo Co. and Nippon Sheet Glass Co. (5202) jumped more than 10 percent after the yen reached a three-year low against the euro. Cosmo Oil Co. surged 11 percent on a report the refiner’s pretax profit for the year ending March 2014 may increase 50 percent. Hitachi Construction Machinery Co. (6305), a machinery maker that gets 17 percent of its revenue in China, gained 2.3 percent after imports to the world’s second- biggest economy surged 14 percent.

The Topix advanced 1.7 percent to close at 1,121.04 in Tokyo with about two stocks rising for each that fell. It capped a six-day rally, the longest streak since December. The Nikkei 225 Stock Average (NKY) gained 0.7 percent to 13,288.13. Volume was 54 percent above the 30-day average. Shares maintained gains after China reported a trade deficit in March and amid concern North Korea may conduct a missile test.

“The yen’s drop will lift earnings naturally,” said Isao Kubo, a Tokyo-based equity strategist at Nissay Asset Management Corp., which oversees about 5 trillion yen ($50 billion.) “Japan has done fairly aggressive monetary easing without drawing criticism from other nations, which makes me think the yen will stay in a downtrend for a while.”

The Topix surged 55 percent from mid-November as Prime Minister Shinzo Abe and central bank Governor Haruhiko Kuroda pledged to defeat 15 years of deflation. The gauge traded at 1.3 times book value compared with 2.4 for the Standard & Poor’s 500 Index and 1.6 for the Stoxx Europe 600 Index, according to data compiled by Bloomberg.

Unprecedented Stimulus

The BOJ on April 4 said it will double the monetary base by the end of 2014 by buying government bonds, its boldest round of quantitative easing. The central bank is scheduled to make the next policy announcement on April 26.

The yen has weakened against all of its 16 major counterparts this year on speculation the BOJ’s stimulus will debase the currency. The yen reached 130.09 per euro yesterday, the lowest level since January 2010. A weaker yen boosts the value of overseas earnings at Japanese exporters when repatriated home.

Nintendo, a maker of video-game players that depends on Europe for a third of its sales, soared 11 percent to 11,850 yen, the biggest gain since 2008. Nippon Sheet Glass Co., a glass maker that gets 41 percent of its sales in Europe, surged 13 percent to 117 yen, the most since Feb. 5. Canon Inc. (7751), a camera maker that gets 79 percent of its revenue abroad, rose 2 percent to 3,545 yen.

Fed Minutes

Futures on the S&P 500 Index (SPX) advanced 0.1 percent before the Federal Open Market Committee releases minutes of its March 19-20 meeting today. The gauge rose 0.4 percent yesterday on optimism over earnings and as commodities gained after a report showed China’s inflation rate slowed, easing pressure on policy makers to tighten credit.

China’s exports increased 10 percent in March from a year earlier, the customs administration said today in Beijing. That compares with 21.8 percent growth in February and the 11.7 percent median estimate in a Bloomberg News survey of 36 economists. Imports rose by an above-forecast 14.1 percent, leaving an unexpected trade deficit of $880 million.

Japanese exporters to China advanced with Hitachi Construction adding 2.3 percent to 2,230 yen. TDK Corp. (6762), a maker of electronics components that depends on China for 27 percent of its sales, rose 4.2 percent to 3,390 yen.

Cosmo Oil jumped 11 percent to 220 yen after the Nikkei newspaper reported its pretax profit for the year ending March 2014 may rise 50 percent to 60 billion yen on a weaker yen and the valuation of oil inventory, without attribution.

Earnings Results

Aeon Co., Japan’s biggest retailer, gained 5.7 percent to 1,352 yen before reporting its results tomorrow after the market closes. It’s among 17 companies on the 1,698-member Topix set to report earnings tomorrow, according to data compiled by Bloomberg.

Universal Entertainment Corp., a gaming company, plunged 16 percent to 1,666 yen as Chairman Kazuo Okada faces a U.S. criminal investigation related to his Philippine casino project.

The U.S. asked to intervene in a lawsuit brought by Wynn Resorts Ltd., which accused Okada of making improper payments to Philippine gaming regulators. The Justice Department said in an April 8 filing in state court in Las Vegas that it doesn’t want the civil case to disrupt its criminal investigation into the same underlying allegations.

The Nikkei Stock Average Volatility Index (VNKY) dropped 4.1 percent to 28.43, indicating traders expect a swing of about 8 percent on the benchmark gauge over the next 30 days.

To contact the reporter on this story: Yoshiaki Nohara in Tokyo at ynohara1@bloomberg.net

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


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