Japan Stocks Up; CPI Falls, Jobless Rate Rises

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

The indexes in Japan gained led by commodities, after shares surged in Europe and US after China rejected media speculation that it may lower its foreign reserve holdings in the euro-zone debt. The yen weakened.

[R]5:00 AM New York, 7:00 PM Japan- Indexes in Japan gain after shares surged in Europe and US. Japan’s unemployment rises to 2.9% in April, while consumption expenditures decline 2.1% and consumer prices fall 1.2%. Moody’s lowered debt rating of Promise & Co.[/R]

The indexes in Japan gained led by commodities, after shares surged in Europe and US after China rejected media speculation that it may lower its foreign reserve holdings in the euro-zone debt. The yen weakened.

China’s official Xinhua News Agency had clarified that the nation’s $300 billion sovereign wealth fund will maintain its euro-zone investments, citing China Investment Corp President Gao Xiqing.

There was further optimism that the European fiscal debt crisis will be contained after the Spanish government approved a narrow Є40 million budget, while the Federal Bank of St. Louis President James Bullard said the sovereign debt crisis will not likely spread because of recoveries in the U.S. and Asia.

Gains were however trimmed as a government report showed that unemployment rose in April.

In Tokyo trading Nikkei 225 Stock Average increased 1.3% or 123.26 to 9,762.98, falling 0.2% for the week, and the broader Topix Index advanced 1% to 878.52, dropping 0.1% for the week.

Of the Nikkei 225 index stocks, 186 rose, 29 fell, and 10 were unchanged. Mitsui Engineering and Shipbuilding led gainers in the index shares with a rise of 5.6% followed by Mitsui Chemicals jumping 4.9%.

Daiichi Sankyo Co and Ranabaxy Laboratories Ltd are in talks with the Food and Drug administration, after the US regulator blocked import of more than 30 generic drugs made at Ranbaxy’s two plants in India.

Daiichi’s new CEO Joji Nakayama said he’s confident his company will resolve the problem.

“We definitely must solve the problem and I’m very confident we’ll solve it since there is no other way,” said Nakayama in an interview in Tokyo today.

Nissan Motor Co’s inventory of vehicles which was at 59 days of sales at the beginning of May, down from 84 days a year earlier, is offering $500 discount on all its brand vehicles from today through May 31, in an effort to boost sales in the US during the Memorial Day holiday weekend.

Moody’s Investor Service today cut the rating of Promise Co, Japan’s second-largest consumer lender by market value by two levels from Baa2 to Ba1.

Moody’s lowered the rating to below investment grade and termed its outlook for the company as negative in its statement today.

“The challenges Promise faces are the same for the entire consumer loan industry in Japan,” noted Moody’s in the statement.

Japan’s consumer finance companies are cutting jobs and closing branches in preparation for rules that cap lending rates to 20% and loans to a third of a borrower’s annual income.

Honda Motor Co, Japan’s second largest automaker, built more vehicles as demand recovered in the US and Japan and continued to grow in China.

Honda’s output rose 27% to 294,308 vehicles from 231,399 a year earlier, the company said in a statement issued today.

Employed Persons Rise 2.9% in April

Japan’s Statistics Bureau reported today that the number of unemployed persons rose 2.9% or 100,000 to 3.56 million in April.

Employed persons also fell 0.8% or 530 000 to 62.68 million and the unemployment rate stood at 5.1% in seasonally adjusted terms.

Consumption Expenditures Fall 2.1% in April

Separately, the bureau said the average of monthly consumption expenditures per household for April 2010 fell 2.1% in nominal terms and 7.1% in real terms to 299,996 yen from the same period a year ago.

The average of monthly income per household gained 0.2% in nominal terms and 1.6% in real terms to 474,616 yen from a year earlier, while average of consumption expenditures fell 3.7% in nominal terms and 2.3% in real terms to 331,621 yen.

Consumer Prices Fall 1.2% in April

Japan’s consumer price index was flat for the month but fell 1.2% to 99.6 in April.

Food prices rose 0.9% for the month, but fell 0.7% for the year; housing prices were unchanged and fell 0.3% from a year ago, while fuel, light and water charges dropped 0.3% from March and slipped 4.1% from a year earlier.

Services dropped 0.9% from a month ago and decreased 1.2% from 2009.

The consumer price index for Ku-area of Tokyo, which is the harbinger for prices in Japan, tumbled 0.1% from the previous month and declined 1.4% to 99.1 in May.

Food prices fell 0.8% in the month and 1.3% from a year ago; housing rose 0.1% from April but fell 0.7% in the year.

Fuel, light and water charges increased 0.5% from April and fell 3.3% in May.

Nikkei 225 Stock Average Movers

Mitsui Engineering & Shipbuilding led gainers in the Nikkei 225 index stocks with a rise of 5.6% followed by Mitsui Chemicals 4.9%, Kawasaki Heavy Industries 4.8%, CSK Holdings Corp. 4.7%, and T&D Holdings 4.6%.

Unitika led decliners in the Nikkei 225 index stocks with a fall of 2.6% followed by Hitachi Ltd 2.2%, Nippon Paper Group 1.9%, Osaka Gas Co. 1.6%, and NEC Corp. 1.5%.

Other Movers

Shipbuilders gained on expectations that debt crisis in Europe will not spread. Kawasaki Kisen gained 3.6% to 371 yen and Hitachi Zosen edged up 2.7% to 114 yen.

Exporters rose as the yen fell to 91.37 against the dollar from 90.32 yesterday. Fanuc increased 4.4% to 9,650 yen, Canon rose 1.6% to 3,740 yen and Nintendo Co. jumped 2.8% to 26,760 yen.

Sony Corp. rose 1.8% to 2,838 yen after the company announced plans to sell its digital-book device in China, Japan and Australia this year.