Japan GDP Contracts, Stocks Fall

123jump.com Staff
13 Aug, 2008
New York City

Stocks in Japan fell 2% after economy contracted at the end of the first fiscal quarter and current account surplus fell. Exports declined in the quarter along with the rising food and energy prices kept consumer spending in check. GDP in the quarter to June contracted at 2.4% as exports fell 2.3% and imports declined 2.8% with the consumer spending weakening by 0.5%. Mitsubishi UFJ commences its tender offer to acquire UnionBanCal and may have to raise it above the current $3 billion offer.

[R]5:00 AM New York, 7:00PM Tokyo - Japan’s GDP contracted at 2.4% annual rate in the quarter to June. Current account surplus slumps 67.4% in June.[/R]

Stocks in Japan fell markedly after a government report showed that the country’s gross domestic product dropped in the three-month period ending June and the current account surplus fell to a record in June on rising oil prices.

Falling earnings results and forecasts from Dentsu and T&D Holdings also negatively impacted the trading sentiment.

[Market Sentiment

In Tokyo trading Nikkei 225 declined 2.11% or 280.55 to 13,023.05, and the broader Topix Index fell 2% or 24.94 to 1,246.48.

In the first section of the Tokyo Stock Exchange 9.5 billion shares valued at 968 billion yen were traded and in the second section 99 million shares valued at 1.8 billion yen changed hands.

Of the Nikkei 225 stocks 24 rose, 195 declined, and 6 were unchanged. IHI Corp led advancers in the index shares with a rise of 9.75% followed by Showa Denko KK increasing 3.75%.

GDP Contract at 2.4% Rate

Japan’s Cabinet Office reported on its Web site today that the country’s gross domestic product contracted at an annualized 2.4% rate in the quarter to June as exports weakened and consumer demand on rising food and energy costs.

The economy also fell by 0.6% from a rise of 0.8% that was realized in the first quarter. Domestic demand also declined by 2.5% from a gain of 0.4% in the three months ended June.

According to the cabinet office, private demand fell by 0.6% from the first quarter to an annualized decline of 2.2%.

Statistics show that private consumption dipped 0.5% from an increase of 0.7% in the first quarter, while private residential investment slumped 3.4% in the review period. Private non-residential investment also shed 0.2% from the previous quarter.

Official figures indicate that exports of goods and services in the quarter to June slipped 2.3% and imports slid 2.8% in the period.

Current Account Surplus Drops 67.4% in June

The Ministry of Finance indicated that exports declined 1.5%, while imports soared 17.8% to 6.59 trillion yen in June. The current account surplus fell by 67.4% to 493.9 billion yen from 1.52 trillion yen realised a year earlier.

In addition, the income surplus rose 29.9% to 593.4 billion yen from a year ago.

Gainers & Losers

IHI Corp. led advancers in the Nikkei 225 index shares with a rise of 4.64% followed by increases in Showa Denko K.K of 3.75%, in Mitsubishi Materials of 2.05%, in Nippon Yusen of 2.02%, and GS Yuasa Corp. of 1.94%.

Shipping lines rose. Mitsui OSK Lines advanced 1.65% and Kawasaki Kisen edged up 1.10%.

Steelmakers increased as well. Nippon Steel gained 0.58% and Kobe Steel soared 0.38%.

Tokai Carbon Co. led decliners in the Nikkei 225 index shares with a fall of 9.75% followed by losses in Clarion Co. Ltd of 7.47%, in Chiyoda Corp. of 6.33%, in Kumagai Gumi Co of 6.17%, and Sumitomo Heavy of 5.83%.

Insurance companies declined after T&D Holdings reported that net income for the first quarter ended June 30 dropped 68% to 9.1 billion yen year-on-year on falling dividend income as well as a 9.5 billion yen charge on a slump in stock investments.

T&D Holdings shed 5.73% and Sompo Japan Insurance slid 5.50% as a result.

Dentsu Inc also tumbled after reporting that profit fell 5.2% to 209,100 yen on falling demand.

Exporters declined after the traded at 108.54 against the yen. Canon plummeted 2.43% and Casio Computer climbed down 1.93%.

Mitsubishi UFJ Makes Takeover Bid for UnionBanCal Corp.

Mitsubishi UFJ reported on its Web site today that it will commence a cash tender offer in the United States for all of the outstanding shares of common stock of UnionBanCal Corporation ((UB)), a consolidate it with its subsidiary listed on the New York Stock Exchange. The UnionBannCal rose nearly 80% in the last five trading days after the tender offer news.

Japan Beer Sales Rise 9.6% in July

JapanToday reported that beer and quasi-beer shipments in Japan increased 9.6% to 52,346,000 cases in July from a year ago.

According to the report shipments of third-segment alcoholic beverages that have little or no malt content increased 35.9% to 12,042,000 cases, while beer advanced 3.4% to 29,048,000 cases after four straight months of decline.

Asian Markets Review

The Nikkei 225 Index in Tokyo closed lower 280.55 or 2.11% to 13,023.05, Hang Seng index in Hong Kong decreased 347.57 or 1.61% closed to 21,293.32. ASX 200 index in Australia decreased 102.00 or 2.02% to close 4,951.60. The KL Composite index in Malaysia decreased 6.25 or 0.56% closed to 1,112.53.

The Kospi Index in South Korea decreased 14.40 or 0.91% to close at 1,562.72, SET index in Thailand closed lower 1.33 or 0.19% to 701.60 and JSE Index in Indonesia increased 5.94 or 0.29% to 2,063.52. The Sensex index in India decreased 119.01 or 0.78% closed to 15,093.12.