Bank of Japan Trims GDP Outlook; Nikkei Drops1.8%

Chandrasekhar Atreya
29 Oct, 2010
New York City

A drop in industrial production index combined with a strong yen dragged Tokyo index lower by 1.8%. Bank of Japan trimmed economic outlook for 2010 and 2011. Nissan recalls 2.14 million vehicles worldwide. New housing starts rise 18% in September.

[R]5:00 PM Tokyo, Japan – A drop in industrial production index combined with a strong yen dragged Tokyo index lower by 1.8%. Bank of Japan trimmed economic outlook for 2010 and 2011. Nissan recalls 2.14 million vehicles worldwide. New housing starts rise 18% in September.[/R]

Tokyo stocks hit an intra-day low of 9,200 after industrial production declined and the yen surge lowered exporters and chip makers. The index plunged sharply after the Bank of Japan lowered economic outlook.

The Nikkei 225 Stock Average dropped 1.75% or 163.58 to close at 9,202.45. For the week the index dropped 2.38% and for the month the fell 3.73%.

Of the 225 stocks in Nikkei index, 58 gained, 158 decreased and 9 were unchanged.

The yen closed at 80.65 yen to a U.S. dollar in Tokyo today.

Bank of Japan cut its economic growth forecasts on Thursday but kept interest rates near zero, as the export-reliant nation confronts a stronger yen and waning overseas demand.

In its October outlook report, the central bank said it expects Japan’s economy to expand 2.1% in the year through March 2011, and 1.8% in the following year. The central bank in July projected growth rates of 2.6% and 1.9% for the respective periods.

New housing starts rose 17.7% in September from a year ago to 71,998, the Land Ministry said Friday.

Owner-occupied housing starts rose 12.9% to 27,670 while rental-housing starts rose 2.2% to 23,696. Starts for condominiums surged 58.9% to 20,067. New housing starts were higher for the fourth month in a row, according to the ministry.

Exports of cars, trucks and buses increased in September by 10.8% from the year ago month, rising for the ninth month in a row, as shipments to other Asian countries, Europe and Latin America grew, the Japan Automobile Association said Friday.

Exports totaled 438,910 vehicles in the month of September, up from the 396,163 vehicles exported in September 2009, the association said.

Jobless rate in Japan, seasonally adjusted, dropped 0.1% to 5% in September from August, marking the third month of decline in a row, the Internal Affairs Ministry said Friday.

Daihatsu Motors said Friday its net profit for the April September first half of the year jumped 320% from a year ago period, on the back of strong car sales in South-East Asia.

Tokyo Stock Exchange said Friday it is investigating into the possibility of insider trading abuses. The exchange did not cite any specific share or a company.

Since summer, Inpex Corp, Tokyo Electric Power Co and Nippon Sheet Glass Co had large public offerings but some of the stock prices declined with large turnovers even before the plans for new share offerings were announced.

Industrial production index in Japan dropped 1.9% to 92.5 in September, after seasonal adjustment, from August, marking the fourth month of decline in a row, according to preliminary data released by the Ministry of Economy, Trade and Industry on Friday.

The ministry termed it as a downward trend in its assessment.

The number of jobless people totaled 3.4 million in September, down by 230,000 from September of 2009, the ministry said.

Core price index in Japan fell 1.1% in September from a year earlier, the Ministry of Internal Affairs and Communications said Friday, indicating that deflation’s grip on the nations is still quite strong.

The fall was the 19th month in a row of decline, as sluggish domestic demand continues to depress prices.

Nissan Motor Co said it is recalling 2.14 million vehicles worldwide, including 194,409 cars sold in mainland China, to repair a faulty ignition relay that the carmaker said could cause engine problems.

This is also the third largest recall by Nissan, which said no accidents have been reported till date due to this defect. In Japan alone it will recall 761,258 vehicles of nine models produced between 2003 and 2006, apart from 761,528 in the U.S. and Canada and 354,170 vehicles in Europe.

TDK Corp plans to commercialize production of magnets that do not require rare-earth metals, President of the company Takehiro Kamigama said at a news conference in Tokyo.

TDK is conducting R&D on technology that would eliminate the need for rare-earth metals, which are used in the production process as raw materials in magnets. The company hopes to have the technology usable in mass production in five years, Kamigama said.

With the real estate market still depressed since the global financial crisis hit the country in the fall of 2008, there have been no takers for waterfront property in the Aomi and Ariake districts redevelopment zones.

Tokyo Metropolitan Government has decided to lower prices on unsold waterfront property by 7% to 8% and take applications from prospective buyers in January of 2011.

Gainers & Losers

Dai Nippon Sumitomo led gainers in the Nikkei Index with a rally of 7.24% to 726 yen followed by Sojitz Corp 6.47% to 148 yen, Teijin Ltd 6.43% to 298 yen, Osaka Gas Co Ltd 4.76% to 308 yen, Kansai Electric Power 4.19% to 2,038 yen and Chubu Electric Power 4.04% to 2,036 yen.

NGK Insulators led decliners in the index with a drop of 20.9% to 1,219 yen followed by Hino Motors Ltd 14.07% to 348 yen, Advantest Corp 9.03% to 1,531 yen, Sumco Corp 8.11% to 1,247 yen, Konica Minolta 6.36% to 780 yen and Sharp Corp 5.81% to 795 yen.