Nikkei Drops 1.7%, Trade Surplus Soars

Chandrasekhar Atreya
25 Aug, 2010
New York City

Stocks continue to slide deeper in bear territory in Tokyo as the yen advanced. Exports growth in July slowed but trade surplus soared as much as 120%. Mitsubishi joins shale gas development project in Canada.

[R]5:00 PM Tokyo, Japan – Stocks continue to slide deeper in bear territory in Tokyo as the yen advanced. Exports growth in July slowed but trade surplus soared as much as 120%. Mitsubishi joins shale gas development project in Canada.[/R]

Stocks in Japan dropped and the benchmark index Nikkei dropped its lowest level in 16 months after the yen hit a 15-year high against the dollar. The benchmark index dropped below the 9000 mark to its lowest close since April 30, 2009.

The Nikkei 225 Stock Average dropped 1.66% or 149.75 to close at 8,845.39. The broader Topix declined 1.3% to 807.31. The Nikkei is now some 22% below its 18-month high of April 5.

Of the 225 stocks in the index only 19 gained while 199 fell and 7 stayed unchanged.

The dollar hit a fresh 15-year low against the yen Tuesday, falling below 84 yen as investors probed the determination of authorities to halt the currency’s advance.

Ministry of Finance said it may consider unilateral yen-selling market interventions if speculators drive up currency, according to a report in a Japanese newspaper.

Prime Minister Naoto Kan called for an emergency meeting Wednesday afternoon with Chief Cabinet Secretary Yoshito Sengoku and Finance Minister Yoshihiko Noda to discuss ways to curb the yen surge as well as stimulus needed for the economy that seems to be losing steam.

Japan’s trade surplus jumped 119.9% in July from a year earlier, as recovery of exports outpaced that of imports, the Finance Ministry said Wednesday. The surplus reached 804.2 billion yen in July, marking it the 14th straight month of improvement on year-earlier levels, according to the ministry.

However the pace of growth of exports slowed in July for the fifth consecutive month, fanning fears that the country’s broader export-led economy may be losing steam.

Exports climbed 23.5% in July to 5.983 billion yen compared to a year earlier, after a 27.7% increase in June, the Ministry said.

Nippon Sheet Glass said Tuesday it will raise up to 49.8 billion yen in capital through a public share offering. The glass maker will issue up to 234 million new shares, including those that maybe offered via over allotment if demand is sufficiently strong, on the domestic and overseas markets.

The proceeds will be used to increase glass manufacturing equipment.

West Japan Railway Co and Kyushu Railway Co are considering introducing a new bullet service that would link Shin-Osaka Station and Kagoshima-Chuo Station, at the southwestern tip of Kyushu, in 3 hours and 47 minutes and match the air travel rates.

Tokyo Stock Exchange President Atsushi Saito urged the government Tuesday to take a firm stand on the idea of intervening in the foreign exchange market.

“The yen’s recent upsurge is totally unconnected with the economy’s fundamentals. When the government indicates firmly that it may intervene in the forex market, then the government will be able to regain market trust and stop this excessive volatility,” said Saito at a news conference during the day.

Mitsubishi Corp said Tuesday it will join a shale gas development project in the Canadian province of British Columbia, paying roughly 36 billion yen for 50% concession rights. The trading house of Japan struck a deal with Calgary-based Penn West Energy Trust to jointly develop the shale gas reserves and produce natural gas in the Cordova Embayment.

The Cordova Embayment has estimated shale gas reserves of 5 to 8 trillion cubic feet, or roughly twice Japan’s annual gas demand, according to the trader. With more than 1,000 wells expected to be drilled over the next 15 years, Mitsubishi’s investment over that period is expected to reach some 300 billion yen.

Global trade in environmental products, like solar power panels and rechargeable batteries, almost doubled since 2004, according to a report released by Japan External Trade Organization.

The trade reached $182.5 billion or roughly 15.5 trillion yen, in 2009, the report said.

Gainers & Losers

Shizuoka Bank led the gainers in the Nikkei 225 with a gain of 3.71% to 699 yen, followed by Dainippon Sumitomo 1.76% to 692 yen and Isetan Mitsukoshi 1.64% to 869 yen.

Nippon Sheet Glass led the decliners in the Nikkei with a drop of 5.03% to 189 yen, followed by Nippon Suisan 4.66% to 266 yen and Mizuho Trust 4.11% to 70 yen.