Rates on Hold in Japan; Sony Loss Shrinks

Mayank Mehta, Chandrasekhar Atreya and Darlington Musarurwa
10 May, 2010
New York City

Indexes and stocks in Japan rose sharply after a week of selloff after the European Union leaders pledged

[R]5:00 AM New York, 7:00 PM Tokyo – EU agrees on €750 billion bailout facility for containing European credit crisis. Bank of Japan holds key rate at 0.1%. Sony’s operating profit rises to 32 billion yen.[/R]

Japanese stocks gained for the first time in three days after the European Union agreed to an increased bailout package of near $1 trillion to help Greece, Portugal and Spain to sort out their debt problems.

Greece’s deepening fiscal crisis is not hurting Japanese economy, said Bank of Japan Deputy Governor Hirohide Yamaguchi at a press conference after holding an unscheduled meeting to resume a US currency swap deal that expired in February.

The policy board also voted unanimously to keep the interest rate unchanged at the present 0.1% in Tokyo today.

Sony Corp. reviewed its operating profit upwards on reductions in operating and manufacturing costs, including improved segment performance.

JFE Holdings Inc, Japan’s second largest steelmaker, plans to spend as much as 200 billion yen to invest in coal and iron ore mines in Australia and Brazil to double self sufficiency as taw material costs jump, said the President of the Tokyo-based company Eiji Hayashida in an interview.

JX Holdings Ltd, the Japanese energy company created by merging Nippon Oil Corp and Nippon Mining Holdings Inc, plans to speed up refinery closures and invest in upstream projects to boost profit, the company said in a statement in Tokyo today.

The company plans to cut an additional 200,000 barrels of capacity a day by March 2014, moving forward by a year plans to reduce total capacity by 600,000 barrels a day, the statement added. The stock was the best performer on the Nikkei 225, climbing 10% to 538 yen.

Toto Ltd, Japan’s biggest toilet maker, will decide in the next year whether to set up a plant, establish a venture, or invest in an existing company in India, said President Kunio Harimoto in an interview on May 7. The company operates factories in Indonesia, Thailand and Vietnam and may add a unit in any one of these places to make supplies to India said the President.

In Tokyo trading Nikkei 225 Stock Average advanced 1.6% or 166.11 to 10,530.10, and the broader Topix Index edged up 1.4% to 944.64.

Of the Nikkei 225 index stocks, 204 rose, 16 fell, and 5 were unchanged. JX HD led gainers in the index shares with a rise of 10.3% followed by Minebea Co. Ltd. jumping 7%.

EU Agrees on €750 billion Bailout Facility

The European Union and the IMF today agreed on a €750 billion facility that is meant to forestall the sovereign debt crisis in Europe, particularly in Greece.

The package consists of €440 billion of loans from euro-zone governments, €60 billion from an EU emergency fund, and €250 billion from the International Monetary Fund.

A special off-balance-sheet entity will be formed to lend to countries in a bid to circumvent one of the provision of the EU treaties that forbids a country to takeover the debt of another.

European Central Bank has since began buying euro-zone government and private bonds, while the US Federal Reserve announced it will reopen swap lines with other central banks to ensure availability of the greenback.

Bank of Japan Holds Rates at 0.1%

Bank of Japan unanimously elected to hold its key rate at 0.1% at a monetary policy meeting held today.

The bank also indicated that it will pump 2 trillion yen in the market for the second day.

The intervention is meant to further facilitate money-market operations and maintain the smooth functioning of the money market as well as ensuring stability in financial markets.

Separately, BOJ Deputy Governor Hirohide Yamaguchi said the Greek crisis will not affect the local market “as the policy measures taken will halt the adverse effect on financial markets and economies.”

Sony’s Operating Profit Rises to 32 Billion Yen

Sony Corp. reported today that its operating profit rose to 32 billion yen in the fiscal year ending March due to improved segment performance of 30 billion yen.

Its net loss is expected at 41 billion yen from an earlier estimate of 70 billion yen.

According to the company, the performance is being driven by less than expected price declines and reduction in manufacturing costs and operating expenses.

Gainers & Losers

JX HD led advancers in the Nikkei 225 index stocks with a rise of 10.3% followed by Minebea Co. Ltd 7%, Toyobo Co. Ltd. 6.8%, Fuji Heavy Industries 5.9%, and Toray Industries 5.6%.

Panasonic Electric led decliners in the Nikkei 225 index stocks with a fall of 6.8% followed by Ebara Corp. 5.6%, Mitsubishi Engineering & Shipbuilding 4.2%, Fanuc Ltd. 3.1%, and Fuji Electric House 1.9%.