Yen Up 4% on Japan Intervention; Toshiba, Mitsubhi Heavy in Merger Talks

Nigel Thomas
04 Aug, 2011
New York City

Stocks in Tokyo trading gained after two days of steep losses. The finance ministry intervened to weaken the yen and the Bank of Japan planned to increase its asset buying program. Toshiba Ltd and Mitsubishi Heavy Industries Ltd entered in merger talks.

[R]4:30 PM Tokyo – Stocks in Tokyo trading gained after two days of steep losses. The finance ministry intervened to weaken the yen and the Bank of Japan planned to increase its asset buying program. Toshiba Ltd and Mitsubishi Heavy Industries Ltd entered in merger talks that may create one of the largest conglomerates with $150 billion in revenues.[/R]

Stocks in Tokyo trading closed mixed but surged in the morning trading after the Ministry of Finance intervened and the Bank of Japan cut its scheduled two-day meeting and decided to expand its asset buying program.

The yen rose as high as 78.34 from 77 after the intervention that may last several months. However, the currency buying program is not likely to have a lasting effect as global investors seek a safe haven.

Finance Minister Yoshihiko Noda told reporters that the government is prepared to do more if the currency stays above its expected level but failed to elaborate. He also confirmed that his ministry is in direct contact with officials at several other central banks around the world.

The move was widely anticipated for the last two days and Bank of Japan was expected to provide more measures to support the weakening of the yen. A day ago, the Swiss National Bank lowered its key rate near zero.

The Nikkei 225 Stock Average added 0.23% to 9,659.18 and the broader Topix index fell 0.4 to 826.36. The Nikkei gained after two days of losses.

Stock Movers

Exporters and automakers gained after the yen weakened from its record high.

Toyota Motor added 1.8% to 3,175 yen and Tokyo Electron added 2% to 3,955 yen. Advantest gained 0.8% to 1,300 yen.

Mitsubishi Heavy Industries Ltd and Hitachi Ltd gained after two companies entered in merger talks. The companies are still far apart on various import issues of business segments and staff counts. The companies have still not released merger details.

Mitsubishi Heavy added 3.4% to 361 yen and Hitachi Ltd closed up 1.7% to 471 yen after rising as much as 3.5%.

The merger of two companies is expected to create one of the largest infrastructure conglomerates with $150 billion in revenues.

Nippon Paper Group gained 2.8% to 1,826 yen on the hopes that the restructuring plan will improve profitability of the company.