Political Turmoil Weaken Yen

Mayank Mehta, Chandrasekhar Atreya and Sanjay Barot
31 May, 2010
New York City

The Japanese stocks closed higher after regaining losses in the day on strong earnings growth in pharma companies, leading the Nikkei 225 Stock Average to rise. The broader Topix index increased with advancing stocks leading the declining stocks by a margin of two-to-one.

[R]5:00 PM Tokyo, Japan – The uncertainty in the government makes yen lose against most counterparts. Indexes gained fractionally on better than expected earnings in the pharmaceutical sector and industrial production expanded in April but at a slower pace than expected.][/R]

The Japanese stocks closed higher after regaining losses in the day on strong earnings growth in pharma companies, leading the Nikkei 225 Stock Average to rise. The broader Topix index increased with advancing stocks leading the declining stocks by a margin of two-to-one.

The Nikkei 225 Index in Tokyo closed higher 5.72 or 0.06% to 9,768.70 and of the stocks in the index, 136 increased, 77 declined and 12 was unchanged.

The uncertainty in the government stability weakened the yen against international, after a recent poll showed that more than half the voters of Japan want the Prime Minister Yukio Hatoyama to resign.

The yen declined after Social Democratic Party resigned from the ruling coalition ahead of parliamentary elections in two months. Nearly two-thirds polled prefer Prime Minister Hatoyama to resign after failed to deliver on campaign pledge to move the U.S. military base.

Yield’s from the 10-year bonds fell in Japan today as demand for the relative safety of these bonds got a boost from the downgrading of Spain by one notch to AA+ by Fitch Ratings.

Industrial production grew less than expected in April, the latest sign that the economic recovery may be slowing down. The factory output rose 1.3% from March where it gained 1.2%, as per statement issued by the Trade Ministry in Tokyo today.

Zhu Linjie, a Beijing-based spokesman for Honda Motor Co, said by phone today that employees who struck work at a parts factory of the company have expressed willingness to end the strike in a meeting with the management.

The plants in China are expected to remain mainly closed today while no decision has been made about output tomorrow, said Yasuko Matsuura, a company spokeswoman in Tokyo today.

Komatsu Ltd, the world’s second largest maker of excavators seeks to benefit from a rebound in construction activities in the US with the recovery in the housing market there.

“There are many positive signs in the US market that the housing sector will recover soon and previously when this happened machinery sales typically grew between 30% and 50%,” said Kunio Noji, President of Komatsu Ltd in an interview on May 28 at company headquarters in Tokyo.

Supercomputers will become a billion dollar business in a short span of five years as sales of these machines are growing at four times the pace of conventional servers, said Masahiko Yamada ‘ President of Fujitsu’s Technical Computing Solutions Unit in an interview in Tokyo today.

‘We expect to control 10% of the market from the current 2.2% in that timeframe by tapping rising demand in Europe, said Yamada in the interview.

Nikkei Movers

Nippon Light Metal Company, Ltd led gainers in the Nikkei 225 Stock Average with a rise of 3.9% followed by Obayashi Corp 3.9%, Kao Corporation 3.7% and Nippon Soda Co., Ltd 3.7%.

Shinsei Bank, Limited led the decliners in the Nikkei 225 Stock Average with a loss of 3.2% followed by JTEKT Corporation 2.4%, Daikin Industries Ltd 2.2%, Casio Computer Co., Ltd 2.1% and Mitsui & Co Ltd 2.0%.

Other Movers

Astellas Pharma Inc added 1.7% to 2,935.00 yen after Mizuho Securities Co. boosted its investment rating.

Fujit su Ltd closed unchanged at 585.00 yen after the computer-services provider today announced that its new software for resident information systems for local governments has been deployed by Awaji City, Aioi City (Hyogo Prefecture), and Kamikitayama Village (Nara Prefecture) in Japan. The new software has been operational as of April 2010.

Nippon Soda Co., Ltd rose 3.7% to 334.00 yen.

Sawai Pharmaceutical Co Ltd increased 6.5% to 7,860.00 yen.