Nikkei Gains; Japan to Lower Corporate Tax by 5%

Chandrasekhar Atreya
14 Dec, 2010
New York City

Tokyo stocks rose for the second day led by brokerages and financial companies. Japan proposes to cut corporate tax rates for the next fiscal year by 5%. Marubeni Corp plans to double its global water assets in two years. Toyota recalls 94,000 Sienna minivans in the U.S.

[R]5:00 PM Tokyo, Japan – Tokyo stocks rose for the second day led by brokerages and financial companies. Japan proposes to cut corporate tax rates for the next fiscal year by 5%. Marubeni Corp plans to double its global water assets in two years. Toyota recalls 94,000 Sienna minivans in the U.S.[/R]

Tokyo stocks fluctuated in a narrow range after brokerages advanced and exporters fell as the yen strengthened against the dollar.

The Nikkei 225 Stock Average was increased 22.88 points or 0.22% to close at 10,316.77. The broader Topix was up 0.5% and closed at 901.89.

The yen gained and closed at 83.44 yen to a dollar in Tokyo today.

Japanese Premier Naoto Kan, after a meeting with Finance Minister Yoshihiko Nada and other members of his cabinet, ordered a 5% cut in the nation’s corporate tax rate in the next fiscal year in order to boost the struggling economy.

“I’ve instructed ministers to lower the corporate tax by 5% to lift up the economy and beat deflation,” Kan told reporters in his remarks broadcast last night on TV in Tokyo.

Japanese economy may shrink this quarter after Premier Naoto Kan’s stimulus spending fades, the government-affiliated Economic Planning Association said last week, citing forecasts from economists.

The government tax commission headed by Finance Minster Yoshihiko Noda plans to lower the nominal rate of the state’s portion of the corporate tax from the current 30% to 25.5% in line with the proposal put forward by Prime minister Kan.

The Financial Services Agency announced today that it will extend by one year a law that eases loan conditions for small and midsize companies in Japan.

The law, which was set to expire in March 2011, imposes voluntary obligations on financial institutions to respond to calls from smaller firms to change repayment conditions.

Marubeni Corp plans to buy water-service companies in Southeast Asia, Australia, Middle East as well as China and Chile to double the size of its water assets in the world in two years.

The company completed in December a 40 billion yen acquisition of Aguas Nuevas SA of Chile propelling the company into the top 10 global water providers, said Yoji Ibuki, head of the company’s environment infrastructure unit.

Toyota Motor Corp said it is recalling 94,126 Sienna minivans in the U.S. that were produced between December 2009 and early November this year to replace the brake light switch bracket, which may become deformed when a driver presses on the foot-operated parking brake.

Toyota, which conducted the U.S. recall voluntarily, said it began receiving reports in December 2009 about brake pedals remaining partially engaged and brake lights staying on without the brake pedal being pressed.

Sale of hybrid passenger cars will be less than 1 million this year, according to a forecast by a leading industry consultancy.

JD Power and Associates estimates that sales of cars, which are driven by batteries over short distances and combustion engine over longer distances, will reach 934,000 units in 2010, up from 728,000 in 2009, with about half of the growth coming from Japan where hybrids enjoyed generous tax incentives that lapsed in September.

Stock Movers

Nomura Holdings Inc gained 1.5% to 527 yen while Daiwa Securities, Japan’s second largest brokerage rose 2.9% to 427 yen. Mizuho Securities gained 4.1% to 228 yen.

The announcement of 5% reduction in corporate tax rate helped banks and financial companies to rally.

Mitsubishi UFJ increased 0.5% to 433 yen and Sumitomo Mitsui Financial Group Inc rose 0.6% to 2,805 yen. Mizuho Financial Group Inc, Japan’s third largest bank, gained 0.7% to 144 yen.

Inpex rose by 2.6% to 480,000 yen for its highest close since July 5. Japan Petroleum Exploration Co added 3.9% to 3,170 yen.

Olympus, an optical equipment maker, climbed 3.6% to 2,556 yen after Deutsche Bank upgraded the stock to ‘buy’ from ‘hold.’