Indicators in Japan Improve; Reserves Rise

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

Stocks in Japan struggled as the yen gained and banks declined. Latest read of economic data suggested an improvement in economic conditions. Foreign reserves assets rise above $1 trillion. Toyota estimated latest years net to rise 48% and Olympus dropped after it estimated net to decline 56%.

[R]5:00 AM New York, 7:00 PM Tokyo – Stocks in Japan struggled as the yen gained and banks declined. Latest read of economic data suggested an improvement in economic conditions. Foreign reserves assets rise above $1 trillion. Toyota estimated latest years net to rise 48% and Olympus dropped after it estimated net to decline 56%.[/R]

Nikkei 225 Stock Average drifted lower and the yen gained against the dollar and the euro.

Foreign reserve assets increased in March as traded surplus contributes to the gain in the reserves. Latest read on the current economic conditions showed an improving picture. Banks continued to decline for the second day after Mizuho Group prepares to raise one trillion yen to replenish capital.

The yen rose to 92.44 against the dollar from 92.94 yesterday. The yen firmed to 116.57 against the euro.

The coincident index which is a composite of 11 indicators including retail sales and factory production rose to 101.1 in March, the Cabinet Office said today in Tokyo. The latest read on the index indicates that rising exports are helping the economy to regain momentum.

The Bank of Japan last month upgraded its fiscal year GDP growth outlook to 1.8% from the previous estimate of 1.3%.

U.S. Transportation Secretary Ray LaHood visited the Central Japan Railway Co to consider options to rail link Washington and Baltimore and eventually extending the link to New York and Boston. Maglev trains float above tracks propelled along by magnetic currents and can achieve speeds up to 500 kilometer per hour.

‘We are at the beginning of an opportunity for cities in US to be connected by high-speed maglev trains’, said Transportation Secretary Ray LaHood after completing a test drive in Yamanashi, West of Tokyo.

‘Given Japan’s demographics showing an aging population, the current account surplus may decrease and may even go into deficit. We may need to increase reliance on foreign buyers, whether we want it or not’, said Masaaki Kaizuka, Director of debt management at the Finance Ministry in Tokyo today.

Morgan Stanley is facing a probe by U.S. federal prosecutors for allegedly misleading investors on mortgage derivatives. Mitsubishi UFJ Financial Group has 20% equity in the firm.

However, Morgan Stanley Chief Executive James Gorman said he wasn’t aware of any U.S. federal investigation into his firm.

The Securities Exchange Commission also declined to comment and the news was first reported by the Wall Street Journal.

In Tokyo trading Nikkei 225 Stock Average fell 0.2% or 17.07 to 10,394.03, and the broader Topix Index advanced 0.1% to 932.83.

In the first section of the Tokyo Stock Exchange 25 billion shares worth 1.7 trillion yen were traded and in the second section 320 million shares valued at 4.3 billion yen changed hands.

Of the Nikkei 225 index stocks, 86 rose, 127 fell, and 12 were unchanged. NTT Data Corp. led gainers in the index shares with a rise of 10.5% followed by Nitto Boseki Co. gaining 9.5%.

Foreign Reserve Assets Rise to $1.05 trillion

Japan’s Ministry of Finance reported today that the country’s reserve assets rose by $4.2 billion from March to $1.05 trillion in April.

Foreign currency reserves stood at $993 billion, the IMF reserve position was $4 billion, while Special Drawing Rights were $20 billion.

Gold reserves were $29 billion, while other foreign currency assets were $19.9 billion.

Coincident Index Rises in March

Japan’s Cabinet Office reported today that the Coincident Index, which measures current economic conditions, rose 1.1 points to 101.1 in March from 100 in February.

The composite index of leading indexes, which shows sentiment for future economic conditions, gained 4.4 points from the previous month to 102.8 in the period.

The lagging index gained to 85.4 points from 84.2 in February.

Nikkei 225 Stock Average Movers

NTT Data Corp. led gainers in the Nikkei 225 index stocks with a rise of 10.5% followed by Nitto Boseki Co. 9.5%, Isuzu Motors 6.3%, Hino Motors 5.6%, and NSK Ltd. 5%.

Olympus Corp. led decliners in the Nikkei 225 index stocks with a fall of 7.7% followed by Trend Micro 5.7%, Mitsui Engineering & Shipbuilding 5.2%, Shinsei Bank 4.4%, and Tosoh Corp. 4.1%.

Other Movers

Automakers gained after Toyota Motor Corp. announced that its profit in the March quarter rose to 112 billion yen from a loss of 766 million yen a year ago.

Revenues also climbed to 5.28 trillion yen from 3.54 trillion yen in the same period a year ago. The carmaker also forecasts that its annual profit will rise 48% to 310 billion yen.

Toyota has already paid a maximum fine of $16.4 million for “delaying” on a recall for acceleration problems. The stock rose 2.6% to 3,590 yen.

Financial stocks fell on reports Morgan Stanley is being probed by the U.S. federal prosecutors for prejudicing investors on mortgage derivatives.

Mizuho Financial Group fell 3.6% to 161 yen and Mitsubishi UFJ Financial Group plunged 2.4% to 449 yen.

Olympus Corp declined 7.7% to 2,418 yen after the camera and medical equipment maker estimated current fiscal year net income of 21 billion yen, 56% lower than the latest year earnings.

NTT Data surged 11% to 357,000 after the company estimated current fiscal year earnings of 47 billion yen, an increase of 32%.