Nikkei Advances 1.4% on 0.3% Decline in GDP

Nigel Thomas
15 Aug, 2011
New York City

Stocks in Japan surged the most in six weeks after the government said the economy shrank at a slower pace than expected in the latest quarter. Exporters and auto makers gained after finance ministry indicated more steps to weaken the yen.

[R]4:30 PM Tokyo – Stocks in Japan surged the most in six weeks after the government said the economy shrank at a slower pace than expected in the latest quarter. Exporters and auto makers gained after finance ministry indicated more steps to weaken the yen.[/R]

Stocks in Japan turned higher after the government released better than expected economic data.

The less than expected decline in the economy contributed to the positive sentiment in the market after a week of wild ride that saw indexes plunge as much as 5% in a day and soar more than 4% a day after.

Japan’s first quarter GDP decline 0.3% from the previous quarter and fell 1.3% from a year ago as the nation battles with triple disaster struck in March. The GDP decline was lower than expected and surprised the market.

Japan is still struggling with power shortages and supply chain problems. The exporting nation is reliant on overseas sales to Europe and the U.S. for its domestic growth.

Last week, the Cabinet Office lowered its fiscal year economic growth outlook to 0.5% from 1.5% on production challenges after the March 11 earthquake and ongoing economic weakness in the U.S. and rising debt stress in the euro-zone.

The government however estimated economic growth to pick in the next fiscal year to between 2.7% and 2.9%.

The yen edged lower to 76.89 from 76.77 in volatile trading but low volume.

The Nikkei 225 Stock Average gained 1.4% to 9,086.41 and the broader Topix index added 1.2% to 777.12.

Stock Movers

Automakers rose after finance minister said in a raid interview that ministry will take steps to weaken the yen.

Toyota Motor increased 2.9% to 2,901 yen and Honda Motor Co. added 3.4% to 2,624 yen.

Sony Corp added 3.9% to 1,694 yen after the confidence recovered in Asian markets trading.

Several of Osaka Stock Exchange listed companies gained after the exchange is close to merging with the Tokyo Stock Exchange. The merger between the two exchanges is in advanced stage of talks according to a report in the newspaper Yomiuri on August 13.

Osaka Stock Exchange soared 8.2% to 409,000 yen.

Murata Manufacturing added 3% to 4,875 yen, Nintendo soared 10% to 11,970 and Omron gained 4% to 1,883 yen.

Isetan Mitsukoshi Holdings Ltd gained 6% to 801 yen after lifted its annual dividend payout to 10 yen from 7 yen a year ago and guided annual net income to increase 83% t 33 billion.

SXL Corp, the bridge price home builder jumped 52% to 88 yen after Yamada Denki Co said it will offer 62 yen a share for the company in a tender offer.

Yamada Denki increased 2.1% to 5,810 yen.

Canon Inc fell 5 yen to 3,585 yen and on Friday the camera and office equipment maker said in a filing with the exchange that plans to buy back 50 billion yen or 1.2% of its shares before Sept 16.

Dai-Ichi Life Insurance Co. added 0.2% to 93,200 yen and extended gains for the second day after it reported first quarter net tripled to 32.3 billion yen from 10.4 billion yen in the quarter a year ago.

China linked machinery and equipment makers declined after China’s banking regulators asked banks to set higher standard for commercial property loans.

Hitachi Construction Machinery added 0.5% to 1,478 yen and Komatsu Ltd gained 1.8% to 2,040 yen.

Mitsubishi UFJ Financial Group Inc closed unchanged to 357 yen and declined 19% for the year and Sumitomo Mitsui Financial added 16 yen to 2,243 yen and dropped 22% in the year so far.