Economy in Japan Expands but Capital Spending Falls, Banks Close Lower

Hiruki Nakamura
16 May, 2013
New York City

Japanese GDP expanded 0.9% in the March quarter as consumer spending increased but the GDP deflator indicated price weakness, highlighting tough road ahead for the central bank. Three largest banks in Japan estimated weak earnings as aggressive monetary easing squeezes bond trading profits.

[R]5:30 PM Tokyo – Japanese GDP expanded 0.9% in the March quarter as consumer spending increased but the GDP deflator indicated price weakness, highlighting tough road ahead for the central bank. Three largest banks in Japan estimated weak earnings as aggressive monetary easing squeezes bond trading profits.[/R]

Stocks in Tokyo retreated and hovered near recent highs as investors digested the latest economic growth data.

Japanese economy expanded at 0.9% in the March quarter from the previous quarter and expanded at 3.5% annual pace, according to the data released by the Cabinet Office in Tokyo today.

The benchmark Nikkei declined more than 1.1% before recovering after the GDP report because capital investment declined 0.7% compared to the estimate of 0.7% increase by economists.

The yen edged higher to 102.14 against one dollar and the yen has dropped nearly 20% from 86.67 at the beginning of the year.

The Nikkei 225 Stock Average slid 58.79 or 0.4% to 15,037.24 and the broader Topix Index fell 7.62 or 0.6% to 1,245.23.

Stocks in Review

Toyota Motor Corp gained 10 yen to 6,450 yen and Honda Motor Co. slid 10 yen to 4,175 yen and Nissan Motor Co Ltd increased 13 yen to 1,160 yen.

Sony rose 10 yen to 2,082. Canon Inc jumped 35 yen to 3,775 yen and Nikon climbed 101 yen to 2,830 yen.

Fanuc Corp. dropped 90 yen to 16,370 yen Softbank Corp declined 140 yen to 5,820 yen.

Olympus soared 18% to 3,215 yen after the maker of cameras and endoscopes estimated 30 billion yen of profit in the current year, a near three-fold jump from a year ago.

Seven & I Holdings Co plummeted 145 yen to 3,920 yen. Fast Retailing Co. slumped 550 yen to 38,250 yen.

Mitsubishi UFJ Financial Group fell 26 yen to 706 yen and Sumitomo Mitsui Financial Group dropped 145 yen to 4,770 yen.

Panasonic Corporation fell 13 yen to 885 yen after the electronics products maker net losses in the year ending in March narrowed to 754.25 billion yen or $7.4 billion compared to loss of 772.1 billion yen.

Revenue for the year declined 6.9% to 7.30 trillion yen and operating profit more than three-fold to 160.94 billion yen.

Sumitomo Mitsui Financial Group declined 2.9% after the bank expected earnings in the current year to decline as monetary easing makes loans less profitable whilst borrowing increased. The bank estimated net income to plummet 27% to 580 billion yen or $5.7 billion in the year ending in March.

Separately, Mitsubishi UFJ Financial Group expects profit to decline 11% to 760 billion yen at the end of the year in March. The lender said in a statement net income dropped 13% to 852.6 billion yen in the last fiscal year.

Mizuho Financial Group, Inc. slipped 7 yen or 3.1% to 219 yen after the third largest bank in Japan expected net profit in the current financial year to drop 10.7% to 500 billion yen or $4.90 billion from 560.5 billion yen in the year ended in March 2013.