Japan Lowers View on Economy; Firm Yen

Chandrasekhar Atreya
19 Oct, 2010
New York City

Japanese stocks rebounded Tuesday on earnings outlook and a pause in yen

[R]5:00 PM Tokyo, Japan – Japanese stocks rebounded Tuesday on earnings outlook and a pause in yen’s strength. The government cuts its view of the economy. Okinawa Electric Power Co starts smart grid control of renewable electric supply. Business sentiment remains grim in October. China plans to reduce rare earth mineral export further next year.[/R]

Stocks in Tokyo rebounded after the yen traded near its recent highs and ahead of earnings from export led companies next week. In a directionless trading, stocks closed higher. Business sentiment outlook was less than expected.


The Nikkei 225 Stock Average gained 0.43% or 40.96 to close at 9,539.45. The broader Topix gained 0.4% to 833.73 and rebounded form the dip of less than 0.1%.

Of the 225 stocks in the Nikkei index, 154 gained, 57 decreased and 14 were unchanged.

The yen closed at 81.35 to a U.S. dollar in Tokyo trading.

The Japanese government cut its view on the economy for the first time in over a year and a half, because of weakened demand from other Asian nations cut into Japan’s industrial output.

“The economic momentum appears to be entering a lull recently,” the government said in its monthly economic report released Tuesday. A Cabinet Office briefing to reporters said the negative revision was due to slowdown in the Chinese economy, which damaged business activity in other Asian nations and in turn reduced demand for Japan-made products.

China could help stem the rising inflation it is likely to face in the near future by guiding the yuan higher, the World Bank said in a report issued Tuesday.

Further asset price increases would pose a key risk to the rapidly growing Chinese economy. But, a gradual rise in the local currency’s nominal exchange rate could help stem the price pressures, the Washington-based World Bank said.

A global meeting on biodiversity opened in Nagoya on Monday, with a large divide between the industrialized and developing nations. On the first day developing countries asked for a rule requiring companies and others disclose the plants and animals used in their R&D when submitting applications for patents and study papers.

One of the main goals of 10th meeting of the Conference of the Parties to the Convention on Biological Diversity, or COP 10, is to adopt a protocol on how to share profits from drugs and other products developed from plants and animals in the countries of their origin.

Okinawa Electric Power Co began operating a smart grid to control the supply of renewable energy-derived electricity to the population of 55,000 of the remote Okinawa Prefecture island Miyako-Jima.

This is the first smart grid in Japan that uses renewable energy. The smart grid infrastructure uses massive storage batteries to stabilize electricity supply by offsetting wild fluctuations in the production of solar and wind power.

The business sentiment among manufacturers remains grim in October, according to a Quick Corp survey.

The diffusion index for manufacturers came to 10 in October, edging up only 1 point from its six-month low in September. The yen’s rise and the end of government subsidies for purchases of fuel-saving vehicles held the index relatively in check.

Tokyo Collection Week, a showcase for next year’s spring and summer fashions, opened Monday as the central event at Japan Fashion Week in Tokyo at the Midtown Complex in Minato Ward. The show that ends on Friday showcased new designs from 40 brands.

The Ministry of Economy, Trade and Industry has been shrinking its support for the show and subsidies are expected to be cut off next April.

Even as anti-Japan protests spread in China, Rakuten inc said it is pressing hard with plans to launch an online shopping mall in China in a joint venture with Chinese search engine Baidu Inc.

The virtual mall will open Tuesday as scheduled, Rakuten CEO Hiroshi Mikitani told reporters Monday.

China is considering further reduction in export quotas next year for rare earth minerals to protect the country’s reserves from over exploitation and encourage diversification away from China, Lin Donglu, Secretary General of the Chinese Society of Rare Earths said Tuesday.

Gainers & Losers

Nitto Boseki Co led gainers in the Nikkei with a rally of 5.35% 197 yen followed by Alps Electric Co Ltd 3.39% to 763 yen, Credit Saison Co 3.32% to 1,152 yen, Oki Electric Industries 3.23% to 64 yen, Ebara Corp 3.15% to 360 yen and KDDI Corp 3.13% to 411,500 yen.

NGK Insulators led decliners in the index with a drop of 3.73% to 1,522 yen followed by Nippon Electric Glass Co 2.38% to 1,109 yen, Mitsubishi Paper 2.27% to 86 yen, Yahoo Japan Corp 2.19% to 29,490 yen, Trend Micro Ink 1.87% to 2,357 yen and Softbank Corp 1.73% to 2,662 yen.