Japanese Companies, Banks Hoard Cash

Mayank Mehta, Chandrasekhar Atreya and Sanjay Barot
17 Jun, 2010
New York City

Stocks in Japan declined halting five days of rally after a report showed that U.S. housing starts dropped in May. A report by Bank of Japan noted that Japanese companies held back record amounts in cash and deposits.

[R]5:00 PM Tokyo, Japan – Stocks in Japan declined halting five days of rally after a report showed that U.S. housing starts dropped in May. A report by Bank of Japan noted that Japanese companies held back record amounts in cash and deposits.[/R]

Stocks in Japan declined after rallying for five consecutive days, after a U.S. government report showed that housing starts dropped 10% in May, the steepest drop since March 2009.

The Nikkei 225 Index in Tokyo closed lower 67.75 or 0.67% to 9,999.40 and of the stocks in the index, 47 increased, 164 declined and 14 was unchanged. The broader Topix fell 0.6% to close at 887.48.

The value of financial assets held by Japanese households climbed 3.1% for the quarter ending March 31, from a year earlier, to 1,453 trillion yen, the Bank of Japan said in its quarterly flow of funds report in Tokyo today.

Mirroring trends in the U.S., companies in Japan have accumulated a record amount of cash last quarter, a Bank of Japan report shows.

Non-financial companies held 202.7 trillion yen in cash and deposits as of March 31, the most since 1997, noted the report. Last week a Federal Reserve report showed that companies in the U.S. boosted their liquid assets by 26% in the year through the first quarter.

Takefuji Corp, a Japanese consumer lender was able to redeem its 41.4 billion yen of convertible bonds on time after selling some property and loan assets. The company has started transferring money to the bond holders. The stocks rose as much as 15% immediately after the announcement.

The convertible bond holders had a put option demanding repayment of 1.5% notes maturing in 2018 by June 19, the company said in a statement on Jun 2. The company now has to face stricter consumer lending laws coming into effect from tomorrow with repayment of bonds worth $645 million becoming due in April next.

With the need for risk management of commodities being as strong as ever, Mitsui & Co is planning to increase its commodity trading staff by March 2011 to expand its raw-material hedging business.

“We intend to add new talent at a steady pace and hope to have about 250 people in place within this fiscal year,” said Kenichi Hori, General Manager of the Commodity Trading unit of the company in an interview yesterday.

Nikkei Movers

Dainippon Sumitomo Pharma Co., Ltd led gainers in the Nikkei 225 Stock Average with a rise of 3.0% followed by Kao Corporation 2.6%, Kddi Corp 2.2% and Mitsui & Co Ltd 2.1% and Mitsui Mining and Smelting Company, Limited 1.8%.

Kawasaki Heavy Industries Ltd led the decliners in the Nikkei 225 Stock Average with a loss of 5.8% followed by Alps Electric Co Ltd 4.6%, Ricoh Company, Ltd 4.3%, The Japan Steel Works Ltd 4.3% and Ube Industries, Ltd 3.6%.

Other Movers

Hirose Electric Co Ltd fell 1.8% to 8,540.00 yen.

Mitsui & Co Ltd rose 2.1% to 1,165.00 yen after the company said it has plans to boost commodity trading unit staff by 6% this year.

Nintendo Co., Ltd rose 4.8% to 27,860.00 yen after the maker of portable video- game player’s stock was upgraded to “buy” from “neutral-short term buy” at UBS AG.

Panasonic Corporation, the maker of plasma televisions, fell 2.6% to 1,223.00 yen.

Sony Corporation fell 2.8% to 2,564.00 yen after Sony Music Entertainment and Sony Electronics Inc., together spent $730,000 in the first quarter to lobby with the federal government to act on digital piracy and other issues, according to disclosure reports.