Market Updates

Yen Slips, Current Account Surplus Widens

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

    Nikkei 225 Stock Average rebounded on the weakening yen and improving profit outlook for exporters. Current account surplus surged 65% in March and bankruptcies declined 13% in April. Bank of Japan begins dollar lending operation.

[R]5:00 AM New York, 7:00 PM Tokyo – Nikkei 225 Stock Average rebounded on the weakening yen and improving profit outlook for exporters. Current account surplus surged 65% in March and bankruptcies declined 13% in April. Bank of Japan begins dollar lending operation.[/R]

Stocks in Japan rebounded sharply on improving profit outlook, weak yen and rising current account surplus.

The yen slipped against 13 of its 16 major counterparts as Asian stocks rose after economic indicators showed that employment growth is accelerating in the US and Australia.

The current account that tracks the flow of goods, services and investment income between Japan and its trading partners showed that the surplus widened in March as overseas demand sustained a recovery in the second largest economy of the world.

Exports rose 45% from the previous year while imports climbed only 22%, today’s report of the Ministry of Finance showed. On a seasonally adjusted basis, the current account surplus increased to 1.77 trillion yen from February.

Most companies in Japan have predicted that profits will surge this year to power a recovery from the country’s worst recession on exports and voluntary cost cuts. This optimism stems from the company’s expansion in China and India where rising wages and consumer confidence fuel demand for their products.

Suzuki Motor Corp, Japan’s second largest mini car maker, plans to introduce to the market a plug-in version of its hybrid Swift compact car using Sanyo Electric Company’s batteries, the mini car maker said.

The dealers in Japan will test 60 units of the car that runs 15 kilometers on a fully charged battery, in the second half of the year, the company said in a statement in Tokyo today.

Economy is expected to expand 1.8% in the current year after the 5.2% decline in 2009, as per the median forecast of the board members of the Bank of Japan.

Bank of Japan also announced that it will resume dollar lending operations in order to stem the likely contagion effects of the euro financial crisis.

Exporters also rose as the yen fell to 93.48 against the dollar from 92.68 yesterday and weakened to 118.26 against the euro.

Gains were trimmed after Astellas Pharmaceutical Co and Takeda Pharmaceutical Co. slashed their earnings forecasts on soaring competition on the generic drug market.

In Tokyo trading Nikkei 225 Stock Average advanced 2.1% or 226.52 to 10,620.55, and the broader Topix Index edged up 1.6% to 947.90.

Of the Nikkei 225 index stocks, 193 rose, 30 fell, and 2 were unchanged. Alps Electric Co. led gainers in the index shares with a rise of 16.1% followed by CSK Holdings climbing 14.1%.

Bankruptcies Fall 13% in April

Tokyo Research Ltd. reported today that the number of bankruptcies for companies with debts of at least 10 million yen dropped 13% to 1,154 in April, falling for the ninth consecutive month.

Total liabilities decreased 48% to 269.99 billion yen in April from a year ago as the number of large-scale bankruptcies with debts of at least 1 billion yen plunged 34.6%.

Current Account Surplus Rises 65.1% in March

Japan’s Ministry of Finance said today the country’s current account surplus rose 65.1% to 2.5 trillion yen driven by a six-fold increase in the trade surplus and declining imports.

The surplus also advanced 26.9% to 15.65 trillion yen in fiscal 2009 after shrinking a year ago.

However, the size of the fiscal 2009 current account surplus was only about 60% of the fiscal 2007 level.

BOJ Begins Fund Supplying Market Operation

Bank of Japan reported today that it will begin a dollar lending operation after the policy board decided at a meeting earlier this week to intervene.

The central bank will provide an unlimited amount of dollars against pooled collateral at a fixed rate for a term of 84 days.

Sony Corp. Loss Eases to 40.8 Billion Yen

Sony Corp. reported today that loss in the full year ended March eased to 40.8 billion yen from a loss of 98.9 billion yen as revenues slipped 7% to 7.2 trillion yen from 7.7 trillion yen a year earlier.

Operating income advanced to 31.8 billion yen from a loss of 227 million in the same period a year ago as the business began to reap the rewards of cost-cutting measures and a restructure.

Sony expects that its profit for the year ended March 31, 2011 will rise to 50 billion yen from a loss of 40.8 billion yen this year as sales and operating revenue are estimated to climb 5% to 7.6 billion yen.

Operating income is also forecasted to grow to 140 billion yen.

Nikkei 225 Stock Average Movers

Alps Electric Co. led gainers in the Nikkei 225 index stocks with a rise of 16.1% followed by CSK Holdings 14.1%, Isuzu Motors 2.6%, Fuji Electric House 7.6, and Tokyo Electron 7%.

Tokyo Electron rose after announcing it expects to post a 55 billion yen profit on improving revenues.

Toho Zinc led decliners in the Nikkei 225 index stocks with a fall of 4.9% followed by Sky Perfect JSAT 4.6%, Eisai Co. Ltd. 1.6%, Taisei Corp. 1.5%, and Chiyoda Corp. 1.5%.

Other Movers

Takeda Pharmaceutical Co. fell 1% to 3,950 yen as the company announced net income will decline 26% to 220 billion yen in the year ending March 2011.

Astellas Pharmaceutical Co. dropped 1.1% to 3,175 after saying its profit will fall for the third straight year on increased competition for its products.

Exporters rose as the yen weakened against the dollar.

Bridgestone Corp. advanced 2.1% to 1,640 yen and Canon Inc. climbed 1.7% to 4,140 yen.

NGK Insulators Ltd. jumped 6.9% to 1,884 yen after saying it expects a 40% increase in net income to 25 billion yen this fiscal year.

Sojitz Corp. edged up 1.9% to 2,284 yen on planned investment of 10 billion yen to increase solar power capacity in the U.S. to 100 megawatts by 2015.

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