Japan Stocks Waver; Prime Minister Kan Resigns

Nigel Thomas
26 Aug, 2011
New York City

Stocks in Japan wavered as Prime Minister Naoto Kan resigned and paved the way for the sixth prime minister in five years. The yen flirted near recent highs and banks and exporters traded volatile.

[R]6:00 PM Tokyo – Stocks in Japan wavered as Prime Minister Naoto Kan resigned and paved the way for the sixth prime minister in five years. The yen flirted near recent highs and banks and exporters traded volatile.[/R]

The benchmark index in Tokyo edged lower and for the week gained after four weeks of decline. The index is above the lows last seen in March but has flirted near 8,600.

Stocks have been on the defensive all week on the rising yen, uncertain economic outlook in the U.S. and Europe and political uncertainty at home.

Prime Minister Naoto Kan resigned Friday as the head of the ruling Democratic Party of Japan after parliament passed two bills. The ruling party is expected to elect new president on Monday.

Kan survived 15 months in the office and was the fifth prime minister in five years and suffered a blow to his credibility on the violation of a campaign financing law and weak response to March 11 triple disaster.

Kan admitted his inability to provide a quick response at a press conference and said “I realized my inability as a prime minister after the Fukushima nuclear accident” and he intends to “continue to make utmost efforts to decrease the nation’s dependency on nuclear power” as a lawmaker.

The yen edged lower to 76.87 from 76.77 in volatile trading but on low volume as the government announced more measures to weaken the yen. Investors are still factoring strong yen by the end of the year and the currency to trade below 80 yen to a dollar.

Two day ago, Finance Minister Yoshihiko Noda proposed $100 billion credit facility to Japanese exporters as the yen surges to a 25-yer high, however the measure is likely to have little impact on the value of the yen.

The Nikkei 225 Stock Average added 0.3% to 8,797.78 and the broader Topix index gained 9.58 or 0.6% to 756.07. For the week the Nikkei index gained 0.9% and dropped 11% in the month so far.

Trading volume on the First Section of the Tokyo Stock Exchange declined to 1.1 billion from the week’s average of 1.7 billion shares. The value of shares trading declined to 1.13 trillion yen from the daily average of 1.4 trillion yen.

Stock Movers

Elpida Memory soared 18% to 535 yen after the D-RAM spot prices recovered 3% in Taiwan. The third largest memory maker before today has lost 40% of its value in the year.

Renesas Electronics Corp increased 22 yen or 4.4% to 522 yen.

Kyowa Hakko Kirin added 3.8% to 789 yen after the company said in a statement that it plans to buy back 4.4% of the outstanding shares.

Banks rebounded a day after the Japanese government debt was downgraded by Moody’s rating agency. The decision is expected to have no impact on the investor sentiment as domestic investors prefer to invest in Japanese government bonds.

Mitsubishi UFJ Financial Group added 2 yen to 335 yen and Sumitomo Mitsui Financial Group gained 11 yen to 2,188 yen. Mizuho Financial Group added 2 yen to 114 yen.

Energy linked companies traded higher after crude oil in New York gained.

Inpex Corp increased 0.4% to 492,500 yen and Japan Petroleum Exploration Co fell 0.5% to 3,105 yen. AOC Holdings Inc declined 2% to 434 after production delay in North Sea prompted an analyst downgrade.

Automakers and exporters traded active after finance minister offered a credit facility to exporters of $100 billion.

Toyota Motor increased 4 yen to 2,768 yen and Honda Motor Co. added 2 yen to 2,442 yen and Nissan Motor gained 1 yen to 674 yen.

Sony Corp rose 0.7% to 1,592 yen and Panasonic increased 2 yen to 794 yen. Nikon Inc increased 8 yen to 1,672 yen. Canon Inc gained 5 yen to 3,535 yen.

Construction equipment makers liked to China closed higher. Komatsu fell 0.8% to 1,985 yen and Hitachi Construction Machinery advanced 1.5% to 1,383 yen.

Kansai Electric Power increased 1.2% to 1,357 yen.

Dai-Ichi Life Insurance Co. fell 2.2% to 87,900 yen.