Japan Intervention Costs $16 Billion

Chandrasekhar Atreya
16 Sep, 2010
New York City

The benchmark Tokyo index closed unchanged after the decline in domestic companies overwhelmed the rise in export stocks. Bank of Japan in a coordinated action conducted the sale of $16 billion of yen to fight the strengthening yen. Marubeni plans to acquire upstream energy assets in Australia.

[R]5:00 PM Tokyo, Japan – The benchmark Tokyo index closed unchanged after the decline in domestic companies overwhelmed the rise in export stocks. Bank of Japan in a coordinated action conducted the sale of $16 billion of yen to fight the strengthening yen. Marubeni plans to acquire upstream energy assets in Australia.[/R]

Tokyo stocks ended flat after reaching intra-day five-week high as the yen failed to continue to weaken despite $16 billion intervention. Gains in export sensitive stocks were overwhelmed by the falls in domestic companies.

The Nikkei 225 Stock Average lost 0.07% or 7.06 points to close at 9,509.50. The broader Topix also fell 0.5% to close at 844.71.

Of the stocks in the Nikkei 225 Stock average, 69 gained, 133 declined and 23 were unchanged.

The tertiary industry activity index rose in July, seasonally adjusted, 1.6% from June to 98.9 expanding for the second month in a row, according to preliminary data released Thursday by the Ministry of Economy, Trade and Industry.

BoJ Governor Masaaki Shirakawa said Thursday at the International Journal of Central Banking conference in Tokyo that the unconventional monetary easing measures were highly effective against the acute problems created by the recent financial crisis.

“Through the experience of the recent crisis, I fully recognize that liquidity and counterparty risk are the two most important concepts in conducting a study on unconventional monetary policy,” he said at the conference.

The Japanese authorities sold yen in the London and New York markets on Wednesday, with the total amount exceeding 2 trillion yen, for the largest single day yen-selling transaction on record.

The government and Bank of Japan carried out their first currency market intervention in more than six years during Tokyo trading hours. Intervention is likely to continue for few more days but history suggests that in the long run these actions are not effective.

The Japanese currency pared yesterday’s losses after the country’s first intervention in foreign-exchange markets since 2004 sent the yen tumbling the most in 22 months.

The yen rose today against all its counterparts amid speculation that Japanese exporters may have seized the chance to buy the currency near its two-week low to bring back overseas earnings before the first half of the fiscal year ends.

The Tokyo Trade Game Show began Thursday at Makuhari Chiba, with 194 firms exhibiting surpassing 180 in 2009.

The number of new game software titles exhibited this year dropped to 712 from last 758 in last year, but with a significant number of these games oriented towards smartphones and personal computers. There were more firms from China and South Korea in the show this year.

Tokio Marine Property Investment Management Inc said Thursday it plans to raise 50 billion yen to invest in Tokyo apartments as it bets that land prices in the city are bottoming out.

Tokio Marine with 209 billion yen in assets plans to start a fund and begin buying properties as early as the end of this year, said Takashi Uematsu, President of the Tokyo-based company.

Hitachi Ltd, Japan’s third-largest company by revenue, said Thursday its unit making batteries for electric cars will likely post losses for at least the next three years after demand from carmakers fell far short of company forecasts.

The division will probably post a profit in the year ending 2014 or the following year with sales of rechargeable batteries probably reaching the targeted 100 billion yen later than the March 2016 forecast, said Yoshito Tsunoda, President of the battery division in an interview on Wednesday.

Japan’s Marubeni Corporation could spend as much as $1 billion on upstream energy assets in Australia, as part of a $4 billion international expansion over the next two years.

Gainers & Losers

Nippon Soda Co led the gainers in the Nikkei 225 with a gain of 4.44% to 329 yen followed by Pioneer Group 4% to 286 yen and Marui Group 3.93% to 634 yen.

Central Japan Rail led the decliners in the index with a fall of 4.11% to 653,000 yen followed by Inpex Corp 3.77% to 396,000 yen and Heiwa Real Estate 3.27% to 207 yen.