Nikkei Drops; Wages Stagnate in Japan

Chandrasekhar Atreya
04 Oct, 2010
New York City

In a volatile trading the Nikkei index closed lower and banks led the decliners. Market has been worried that the revised capital guidelines will force banks to raise more capital sooner than expected. Japan and Mongolia agree to develop mines for industrial metals and rare earth metals.

[R]5:00 PM Tokyo, Japan – In a volatile trading the Nikkei index closed lower and banks led the decliners. Market has been worried that the revised capital guidelines will force banks to raise more capital sooner than expected. Japan and Mongolia agree to develop mines for industrial metals and rare earth metals. Wages stagnated in August.[/R]

In a volatile trading in Tokyo, the Nikkei index searched for direction and dropped as much as 1.1% and declined 0.5% and managed to close down 0.25%. Banks declined on the worries that they may need more capital to meet revised regulations.

The Nikkei 225 Stock Average lost 0.25% or 23.17 to close at 9,381.06. The broader Topix index declined 0.9% to close at 822.74, with more than four shares declining as advancing.

Of the 225 stocks in the Nikkei index, 69 gained, 182 decreased and 4 were unchanged.

The World Steel Association said Monday that global steel consumption is expected to grow 13.1% to 1.27 billion tons in 2010, and 5.3% in 2011, lifted mainly by increased demand from China and India.

The 2010 forecast is an upward revision from a previous estimate of 8.4% after demand rose more than expected in Europe, North America and the countries of the former Soviet Union, the association said in its statement.

Japan may consider regulating real estate purchases in Japan with foreign capital in the face of recent increase in such purchases by China and South Korea, said Foreign Minister Seiji Maehara on Sunday.

Japan and Mongolia agreed to jointly prospect for and mine industrial metals including rare earths in Mongolia. The agreement came during a meeting between Japanese Premier Naoto Kan and Mongolian Prime Minister Sukhbaataryn Batbold on Saturday evening in Tokyo.

Under the deal, Japan will help Mongolia look for rare earths and other metals. In return for technological cooperation, Japan will receive priority in deliveries of the metals produced.

The Ministry of Finance plans to keep the excess liquidity generated by the market intervention at least for the month of October. According to treasury discount bill offering plans for October, the finance ministry does not plan to sell treasury discount bills specifically for paying back funds it borrowed from the Bank of Japan for the forex interventions.

Wages in Japan stagnated in August, failing to rise for the first time in six months, according to government data.

Monthly wages including overtime and bonuses were unchanged at 274,232 yen in August, from a year earlier, the Labor Ministry said in Tokyo Monday. This report adds to the risk on an economic recovery already overburdened by an appreciating yen.

Overtime pay rose 10.8% in August from a year earlier, while special pay that includes bonuses dropped 10.7%, according to this report.

The new economic package of Japan approved by the Prime Minister will be about 48 trillion yen, National Strategy Minister Koichiro Gemba said.

The ruling Democratic Party of Japan will submit a draft to the government on October 6, Gemba told reporters in Tokyo Monday.

Japanese yen fell against all 16 major currecies after the Bank of Japan began a two-day policy meeting on Monday at which policy makers are expected to discuss the need for additional measures to spur growth.

The yen also declined on speculation that Japanese importers will sell the currency to settle accounts overseas.

Anti-China protestors gathered Saturday in Tokyo and six other major cities in Japan to rally against what it calls an invasion of disputed islands that both countries claim as part of their territories.

Beijing says the Diaoyu Islands and most of the South China Sea belong to China, disputing neighboring countries claims. In Japan, these islands are known as Senkaku.

Gainers & Losers

Nippon Soda Co led gainers in the Nikkei with a rally of 4.37% to 358 yen follo0wed by Isuzu Motors 3.35% to 339 yen, Sumitomo Metals and Minerals 3.29% to 1,317 yen, Nissan Chemical Industries 3% to 961 yen, Ricoh Co Ltd 2.87% to 1,218 yen and Yamaha Corp 2.78% to 999 yen.

Mizuho Financial led decliners in the index with a drop of 5.88% to 112 yen followed by Sky Perfect JSAT Holdings 4.83% to 25,790 yen, Mizuho Trust 4.29% to 67 yen, T&D Holdings Inc 4.21% to 1,661 yen, Toho Co Ltd 3.98% to 1,278 yen and Resona Holdings Ltd 3.84% to 702 yen.