Nikkei Surges as Japan Lowers Rates

Chandrasekhar Atreya
05 Oct, 2010
New York City

Bank of Japan lowered its key lending rate to near zero as the central bank struggles to lift demand and expand economy. The central bank also pledged to purchase 5 trillion yen of bonds and stem the rising yen to support exporters.

[R]5:00 PM Tokyo, Japan – Bank of Japan lowered its key lending rate to near zero as the central bank struggles to lift demand and expand economy. The central bank also pledged to purchase 5 trillion yen of bonds and stem the rising yen to support exporters. Leaders of China and Japan met informally in Brussels to ease tensions. Toyota completes repair of 5 million recalled vehicles in the U.S.[/R]

Japanese stocks climbed the most in three weeks after the Bank of Japan cut benchmark interest rates to near zero and pledged to buy bonds of 5 trillion yen. The yen declined from the recent highs.

The Nikkei 225 Stock Average added 1.47% or 137.70 to close at 9,518.76. The broader Topix also gained 1.2% or 9.9 points to close at 832.64.

Of the 225 stocks in the Nikkei index, 179 gained, 32 decreased and 14 were unchanged.

The yen dropped against 14 of the 16 most traded currencies and government bonds rallied after the announcement by Bank of Japan.

The yen dropped to 83.88 per dollar from 83.36 in New York.

The Bank of Japan unanimously decided Tuesday to further ease monetary policy, lowering its target policy rate from the current level of around 0.1% to zero to 0.1% at its two-day policy board meet in Tokyo. This is the first rate cut since December 19, 2008.

Allstate filed a suit in a California court seeking $3 million in compensation from Toyota Motor Corp for about 270 claims, alleging that the accidents were caused by vehicle defects. A spokeswoman for the automaker says the allegations have no basis whatsoever.

Nippon Steel Corp announced Tuesday that it had started formal talks with India based Tata Steel Ltd to build iron mills including blast furnaces in India. Nippon Steel President Shoji Muneoka and Tata Steel President Hemant M. Nerurkar agreed to the deal in Tokyo.

Tata plans to build two blast furnaces each with a capacity of 3 million tons a year and the first of which is expected to commence around 2013.

Prime Minister Naoto Kan and Chinese Premier Wen Joabao held informal talks after an ASEM dinner Monday at which they reaffirmed the need for the two nations to promote strategic, mutually beneficial relations, but disagreed on who had the sovereign rights over the disputed islands in the East China Sea.

About 124 Japanese firms face delays still in trade with China, according to a government survey released Tuesday. Beijing effectively halted exports of rare earth minerals to Japan at one point, after Japan detained a Chinese trawler captain whose boat collided with Japanese patrol boats off the disputed Senkaku Islands in the East China Sea on September 7.

From September 28 to 30, the Ministry of Economy, Trade and Industry polled companies about their post-release Chinese import and export activity, with 424 companies responding. The survey found that 124 companies, or 214 cases, ranging from machine parts makers to construction machinery companies, said they faced delays in trade.

Nippon Steel Corp said Tuesday, it plans to manufacture and sell automotive steel sheet in Mexico, establishing a joint venture with Ternium SA of Luxembourg to meet growing demand for cars.

The venture will be capitalized at $175 million or about 14.5 billion yen, with Nippon Steel holding a 49% stake. The plant to produce 400,000 tons of steel sheet is expected to be up and running in 2013.

Toyota Motor Corp said Monday it had completed repairs on five million vehicles involved in three major U.S. recalls announced in late 2009 and early 2010 for unintended acceleration and braking issues.

The automaker also said that all of its Toyota, Lexus and Scion vehicles for the 2011 model year are equipped with new event data recorder, the black boxes that record conditions in a vehicle that can be used to help identify the cause of accidents.

Fast Retailing Co said Monday that domestic same-store sales at its Uniqlo casual clothing chain tumbled 24.7% in September from a year earlier as unusually hot weather in the month dragged down autumn clothing sales.

The company said the number of customers visiting these stores in September also dropped 14.9% from a year earlier on a same-store basis.

Gainers & Losers

T&D Holdings Inc led gainers in the Nikkei with a gain of 5.6% to 1,754 yen followed by KDDI Corp 5.4% to 410,000 yen, MS&AD Insurance 5.39% to 2,014 yen, Okuma Corp 4.95% to 488 yen, Tokio Marine Holdings 4.77% to 2,350 yen and NKSJ Holdings 4.36% to 551 yen.

Japan Tobacco led decliners in the index with a drop of 2.99% to 262,500 yen followed by Sumitomo Osaka 2.80% to 139 yen, Obayashi Corp 1.87% to 315 yen, Isuzu Motors 1.77% to 33 yen, Sumitomo Metals 1.44% to 206 yen and Shiseido Co Ltd 1.12% to 1,850 yen.