Nikkei Plunges 3.6%; Retail Sales Rise

Chandrasekhar Atreya
31 Aug, 2010
New York City

Stocks in Japan plunge to the year-to-date low and for the month dropped 7.5%. Industrial output, retail sales, and housing starts rise in July. JAL submits a rehab plan to the court. Monthly wages increased 1.3% in July.

[R]5:00 PM Tokyo, Japan – Stocks in Japan plunge to the year-to-date low and for the month dropped 7.5%. Industrial output, retail sales, and housing starts rise in July. JAL submits a rehab plan to the court. Monthly wages increased 1.3% in July.[/R]

Japanese stocks fell sharply, pushing the benchmark index to a fresh year-to-date low, with the yen gaining further relative to the dollar.

The Nikkei 225 Stock Average ended its three-day rally, plunging 3.6% or 325.5 to close at 8,824.06 below the previous yearly low of 8,845.39 on last Wednesday.

For the month Nikkei declined 7.5% while the broader Topix lost 5.3%. Of the 225 stocks in the Nikkei, 224 dropped and 1 unchanged.

Fuji Heavy Industries Ltd, the maker of Subaru brand vehicles, said Monday it will sell its headquarters and its site in Tokyo to Odakyu Electric Railway Co for 34 billion yen.

The car maker will sell the 44-year old building in Shinjuku Ward and will construct another office building it owns in the city to integrate its back-office operations that are located in several cities around Tokyo. The company said it will book a profit of 25 billion yen in the next fiscal year starting April 2011.

The Japanese heavy machinery maker Sumitomo Heavy Industries Ltd said Monday it will spend an additional 10.6 billion yen to boost production capacity at two of its machinery plants in Hubei, China.

The company started production at these plants that makes hydraulic shovels and reduction gears in February 2009. But rapidly growing demand in China prompted the company to increase the capacity of these plants, Sumitomo said.

Industrial output rose 0.3% in July from the previous month, official data showed Tuesday, at better than market expected rate of a 0.3% fall.

The result comes a day after the central bank unveiled $11 billion stimulus and announced monetary steps to sustain the economic development.

Japan Airlines Corp submitted Tuesday to the Tokyo District Court, a rehabilitation program featuring debt waivers, cuts in jobs as well as closures of unprofitable domestic and international routes.

Japan’s housing starts rose 4.3% in July to 68,785 units from a year earlier, for the second straight increase, the Land Ministry said Tuesday. The increase, the largest since a 19.8% rise in October 2008, came as the government put in place a number of measures to support the housing market, including mortgage tax breaks and eco-point incentive program.

The ministry was cautious in making broad conclusions based on these figures, saying the housing market shows signs of recovery, but remains at low levels. Starts of owner-occupied homes climbed 4.4% for the ninth straight month and starts for single-family houses grew 27.3%, for the fifth straight month.

Retail sales in July rose 3.9% from a year earlier, the government said Tuesday, due partly to strong sales of clothing, drinks, and cooling equipment amid warmer weather.

The sales without adjustment for inflation, gained for the seventh straight month, the Ministry of Economy, Trade and Industry said Tuesday, after gaining 3.3% in June.

Supply in the nation’s economy outstripped demand by 4.8% in the quarter ended June, according to Cabinet Office figures release late Monday.

The supply-demand gap reflects the difference between actual gross domestic product and the potential supply from labor and factories working at average capacity. The latest gap, equivalent to an annual demand shortfall of around 25 trillion yen, remained unchanged in value terms from the previous quarter.

Public pension returns from market investments was 3.61% negative in the quarter ended June, with losses reaching 3.65 trillion yen, the Government Pension Investment Fund reported Monday.

Daihatsu Motor Co and Toyota Central R&D Labs Inc said Monday they jointly developed a mini car that runs on gasoline and water-containing ethanol. The partners plan to supply a prototype to Akita Prefecture, which is promoting an energy-recycling system. Daihatsu has no plans to commercialize the car.

The government decided to extend subsidies for buying energy-efficient home electronics and houses as the basis of a fresh economic stimulus package designed to cope with the rising yen and slumping stocks.

The government hopes, the key economic decision made at Mondays’ meeting of ministers, will gain approval at the full cabinet meet on September 10 for enactment by that month end.

The average monthly wage rose 1.3% in July to 367,815 year-on-year, increasing for the fifth straight month, preliminary government data showed Tuesday.

The data obtained from a Ministry of Health, Labor and Welfare survey of companies with at least five employees, indicates that firms paid large summer bonuses thanks to stronger earnings, with the average bonus up 3.5% to 104,213 yen.

NEC Corp and Chinese IT service firm Neusoft Group Ltd announced a plan Tuesday to form a joint venture partnership in the cloud computing business in China. Around October, the two firms will establish a joint venture in Dalian, Liaoning Province, with a capital of 650 million yen, with NEC taking 70% stake through its local arm and the balance by Neusoft.