Nikkei Drops; Political Turmoil in Japan

Mayank Mehta, Chandrasekhar Atreya and Sanjay Barot
12 Jul, 2010
New York City

The ruling party in Japan loses hold in upper house elections. Producer prices rise for the second month in June. Nissan Motor is evaluating China

[R]5:00 PM Tokyo, Japan – The ruling party in Japan loses hold in upper house elections. Producer prices rise for the second month in June. Nissan Motor is evaluating China’s Baosteel for its steel products for quality raw material at cheaper rates.][/R]

Stocks in Japan gained initially on higher commodity prices and a weaker yen but closed lower after Prime Minister Kan’s party lost elections to the upper house.

The Nikkei 225 Stock Average lost 0.39% or 37.21 to close at 9,548.11 in Tokyo today. Of the stocks in the index 77 increased, 135 declined, and 13 remained unchanged. The broader Topix dropped 0.4% to 857.70. Both gauges dropped after having gained at least 0.5% earlier.

The yen weakened against all its major counterparts after Prime Minister Naoto Kan’s Democratic Party of Japan, lost control of Japan’s upper house, undermining the party’s pledge to rein in the burgeoning budget deficit of the nation. The party won 44 seats in yesterday’s election against 51 won by the Liberal Democratic Party.

The ruling party in Japan faced another hurdle in containing deflation as the producers prices rose for a second month in June, driven by an increase in commodity prices.

Japanese companies are paying more for raw materials because demand from emerging markets including China is driving up these prices and they are unable to pass it on to consumers who are used to obtaining cheaper goods.

The amount companies in Japan paid for raw materials and energy rose 0.5% in June from a year earlier, after advancing a revised 0.5% in May, according to data provided by Bank of Japan in Tokyo today.

Baosteel Group Corp said in a statement today that Nissan Motor Co is evaluating it steel products in an effort to lower raw material costs.

This is the first time a Chinese steelmaker has been selected for evaluation as a possible global supplier to Nissan Motor, the Shanghai-based steelmaker said in its statement today on its Web site.

Nikkei Movers

Inpex Holdings Inc led gainers in the Nikkei 225 Stock Average with a rise of 3.7% followed by Sony Corporation 3.6%, Matsui Securities Co Ltd 3.3% and Honda Motor Co., Ltd 2.9% and Showa Denko K.K 2.9%.

Ebara Corp led the decliners in the Nikkei 225 Stock Average with a loss of 3.9% followed by Sumitomo Osaka Cement Co., Ltd 2.9%, Shinsei Bank, Limited 2.7%, Mitsubishi UFJ Financial Group, Inc 2.5% and NTT Data Corp 2.4%.

Other Movers

Chiyoda Corp added 2.8% to 688.00 yen after the plant engineering company was upgraded to “market-perform” from “underperform” at Mitsubishi UFJ Morgan Stanley Securities Co.

Gree, Inc fell 1.2% to 6,180.00 yen after the social-networking site operator was downgraded to “market-perform” from “strong outperform” at Mitsubishi UFJ Morgan Stanley Securities Co.

The Maruetsu, Inc rose 2.1% to 329.00 yen after the supermarket operator was upgraded to “strong outperform” from “market-perform” at Mitsubishi UFJ Morgan Stanley Securities Co.

Nissan Motor Co Ltd rose 1.8% to 655.00 yen after the company unveiled a later version of its 2011 Nissan X-Trail for the Japanese market with new exterior styling.