BoJ Left Rates at 0.5%, Tokyo Stocks Rise

123jump.com Staff
31 Oct, 2007
New York City

The Bank of Japan left the interest rates unchanged at 0.5% by 8 to 1 vote. The Central bank also lowered its annual economic outlook for fiscal 2007 to 1.8% from 2.1% and widened the range for the fiscal 2008. Stocks in Japan rose after the bank decision. Separately wage survey showed that September wages fell 0.5% and monthly hhours worked per person declined 2.3%. Auto parts maker, Denso rose after predicting higher net income.

[R]6:00AM New York, 7:00PM Tokyo – The BoJ left interest rates unchanged and revised lower the forecast for the economic growth in 2007 and 2008.[/R]

Japan’s stock index reversed a 0.6% drop in the morning session to close up 0.52%, spurred by Sapporo Holdings and automakers.

In Tokyo trading Nikkei 225 rose 0.52% or 86.82 to 16,737.63.

On the first section of the Tokyo Stock Exchange 9.0 billion shares worth 1.2 trillion yen changed hands and on the second section 401 million shares valued at 6.4 billion were traded.

Of the Nikkei 225 stocks 145 gained, 75 declined and 5 traded unchanged. Sapporo Holdings led gainers in the index stocks, rising 13.07% after announcing yesterday a tie-up with Morgan Stanley Japan Securities Company. Morgan will pay 50 billion yen for a 15% stake in the company’s property arm, Yebisu Garden Place Company.

Bank of Japan announced today in a statement published on its website that it had elected to hold the key interest at 0.5% by an 8-1vote. Again, Atsushi Mizuno was the lone dissenter for the fifth consecutive time.

The bank also said in its semi-annual outlook report for economic activity and prices that the Japanese economy will continue on a sustained path of economic expansion in the second half of fiscal 2007 through to fiscal 2008. GDP is expected to grow 2% on average, supported by strength in exports to overseas markets, expectations of strong corporate profits that are expected to feed into the household sector, tighter labor markets and accommodative financial conditions.

According to the key outlook report, the consumer price index is expected to rise at 0.4% for the fiscal year 2009 beginning in April 2008. The outlook for inflation was revised lower from 0.5% in April of 2007.

The Outlook for Economic Activity and Prices statement further added that “The rate of real GDP growth in fiscal 2007 and fiscal 2008 is likely to register around 2% on average, somewhat higher than the potential growth rate. The growth rate will be somewhat lower in fiscal 2007 and somewhat higher in fiscal 2008 due to a swing in housing investment.”

The BoJ lowered its outlook for the fiscal 2007 annual economic growth between 1.7% and 1.8% from a range between 2.0% and 2.1%. The BOJ lowered its forecast for the economic growth to 1.8% from 2.1%. For the fiscal 2008 the bank kept the range to 2.1%.

The Ministry of Health, Labor and Welfare said that in its provisional report of Monthly Labor Survey that total wages earnings per regular employee in September fell 0.5% to 271,144 yen. Contractual cash earnings also slumped 0.3% to 269,010 yen and scheduled cash earnings declined 0.4% to 249,607 yen.

Monthly hours worked per regular employee also fell in September by 2.3% from a year earlier to 149 hours, while non-scheduled hours worked in manufacturing were 16.5%, a 1.7% plunge. However, regular employees were increased to 44.5 million in September, an increase of 1.6% compared to a year ago. Full-time employees jumped to 32.9 million, 0.8% increase compared to a year ago and part-time employees increased to 11.5 million, an increase of 3.6%.

Of the Nikkei 225 index shares Sapporo Holdings led advancers, rising 13.07%, followed by rises of 9.22% in Mitsubishi Motors Company, 8.21% in Fuji Electric House, 7.89% in Denso Corp and 7.21% in Fuji Film Holdings.

Sapporo Holdings firmed after announcing yesterday it would ally with Morgan Stanley Japan Securities Company to venture into real estate operations. A special purpose company operated by Morgan Stanley real estate fund would buy a 1.5% stake in the holding company by the end of December and boost it by 5% by the end of June 2008.

The special purpose company will also acquire a 15% stake in Yebisu Garden Place Company for 50 billion yen and help improve the value of the major office, residential and shopping complex in Tokyo. Separately, Sapporo Holdings said it will form a business alliance with Tokyo-based investment fund management firm Crescent Asia to bolster subsidiary Sapporo Beverage Co. According to the company, the tie-ups are expected to increase consolidated operating profit of 40 billion yen in 2016 and sales to 600 billion yen from 435 billion yen.

Denso Corp, Japan’s biggest auto parts maker, rose after announcing it expects net income to soar to 228 billion yen, 10% more than analyst projections as a result of rising demand in overseas markets. Carmakers rose as well. Toyota Motor Corporation rose 2.50%, Honda Motor Corp edged up 2.38% and Nissan Motor Corp climbed 2.79%.

Mitsubishi Rayon Company Limited led the decliners in the index with a loss of 13.35%, followed by losses in Taiyo Yuden Company of 7.48%, in Matsushita Electric Works of 6.82%, in Toto Limited of 5.57% and in Sumco Corporation of 5.02%.

Commodity and energy stocks fell on retreating prices of crude oil and metals. Oil prices slumped 3.4% to $90.38 per barrel after Goldman, Sachs recommended investors to sell energy contracts, forcing Inpex Holdings to slide 3.88%, Nippon Oil to decline 2.69% and Mitsubishi Corp to plummet 4.05%.

Mitsubishi Heavy Industries said in a statement today first half net income climbed 27.99 billion yen from 21.9 billion yen a year ago. Sales in the six months period ended September also rose 6.9% to 1.45 trillion yen spurred by the increased demand for wind and gas turbines, especially in the U.S. as a result of stricter environmental rules on carbon dioxide emissions. The company closed 2% up.

Fujifilm Holdings Corp net income increased 25% to 237 billion yen on higher sales of copiers. Operating profit is forecasted to rise 5% to 210 billion yen this business year. Fujifilm finished 7.21% up at the close of trade.

Matsushita Electric Works second quarter net income rose to 65 billion yen beating the estimates of 60 to 63 billion yen. Matsushita traded up 3.79%.