Nikkei Down 6%, Rate at 0.5%, Reserves at $1 T

123jump.com Staff
07 Mar, 2008
New York City

Stocks in Tokyo declined as financial markets worried that the ongoing U.S. economic slowdown will impact exports from Japan. The new foreclosure data in the U.S. suggested record rise in filings and outlook for the rest of the year is gloomy. Nikkei 225 fell 3.27% or 432.62 to 12,782.80 down 6% for the week, and the broader Topix Index tumbled 3.1% or 39.78 to 1,247.77.

[R]5:00 AM New York, 7:00PM Tokyo – The BOJ left key rate at 0.5%, Toshiro Muto proposed as BOJ successor. Japan’s foreign reserve assets reached $1 trillion.

Stocks in Japan fell the most in six weeks on record rises of foreclosures in the U.S. and plummeting commodity prices that helped to dampen market sentiment. Market watchers believe worsening U.S. outlook will tighten credit markets and adversely impact on financial and realty stocks.

Market Sentiment

In Tokyo trading Nikkei 225 fell 3.27% or 432.62 to 12,782.80 down 6% for the week, and the broader Topix Index tumbled 3.1% or 39.78 to 1,247.77.

In the first section of the Tokyo Stock Exchange 9 billion shares worth 1 trillion yen were traded and in the second section 271 million shares valued at 4.5 billion yen changed hands.

Of the Nikkei 225 stocks 16 gained, 102 declined, and 3 were unchanged. Kyowa Hakko Kog led advancers in the Nikkei 225 index shares with a rise of 9.71% followed by Shiseido Co Ltd. increasing 2.71%.

U.S. foreclosures rise to 0.83% in Fourth Quarter

Mortgage Bankers Association said that the rate of loans entering the foreclosure process was 0.83% of all mortgage loans across the United States are in foreclosure in the fourth quarter of 2007, up from the previous high of 0.78% in the July-September quarter and 0.54% from a year ago.

The association said 5.82% of all mortgages were in delinquency in the fourth quarter, the highest since 1985. The total delinquency rate is the highest in the MBA survey since 1985. The rate of foreclosure starts and the percent of loans in the process of foreclosure are at the highest levels ever. The delinquency rate does not include loans in the process of foreclosure.

While subprime ARMs represent 7 percent of the loans outstanding, they represent 42 percent of the foreclosures started during the fourth quarter. Prime ARMs represent 15 percent of the loans outstanding, but 20 percent of the foreclosures started.

California and Florida continue to represent a disproportionate share of the foreclosure starts in the country. Those two states represent 21% of all loans outstanding, but accounted for 30% of foreclosure starts in the US. These states accounted for 39% of all prime ARMs outstanding, but 47% of prime ARM foreclosure starts.

Late payments in the subprime sector rose 20.02% in the October-December period, from 18.81% in the third quarter. Also the fourth quarter foreclosure rate in the subprime sector rose to 5.29% from 4.72% in the previous quarter.

Bank of Japan keeps key rate at 0.5%

The Bank of Japan reported on its web site today that it had unanimously kept its key rate at 0.5%, marking Toshihiko Fukui’s last policy decision as his term expires on March 19.

Japan proposes Muto for BOJ post

The Nikkei news reported that Government today forwarded the name of Toshiro Muto to the Diet as its nomination to replace Toshihiko Fukui as the Bank of Japan Governor and urged the opposition Democratic Party of Japan to co-operate in his nomination.

The opposition is opposed to Muto’s nomination as they believe his previous stint with the Ministry of Finance will threaten the central bank’s autonomy.

Diet will hold hearings on the candidates on March 11.

Separately, Bloomberg news also reported that technocrats Takatoshi Ito and Masaaki Shirakawa were also proposed as the two deputy governors.

Japan foreign reserves top $1 trillion

Japan’s Ministry of Finance reported on its web site today that the country’s foreign reserve assets increased by $11.9 billion at the end of January to $1 trillion at the end of February.

While foreign currency reserves reached $979 billion, the IMF reserve position stood at $1.3 billion.

Special Drawing Rights and Gold rose to $3.1 billion and $23.9 billion respectively.

Gainers & Losers

Kyowa Hakko led advancers in the Nikkei 225 index shares with a rise of 9.71% followed by gains in Shiseido Co. Ltd. of 2.71%, in Sanyo Electric of 2.63%, in Teijin Ltd. of 2.03%, and in Osaka Gas Co. Ltd of 2.01%.

Drugmaker Kyowa Hakko Kogyo Co. gained after Amgen Inc agreed to pay up to $520 million for rights to an experimental drug.

Kumagai Gumi Co. Ltd led decliners in the Nikkei 225 index shares with a drop of 11.11% followed by losses in Sumco Corp. of 10.80%, in Tokyu Land Corp. of 10.44%, in NGK Insulators of 9.52%, and in Alps Electric Co. Ltd of 8.42%.

Tokyo Land Corp. dropped after it was downgraded by Credit Suisse to “neutral” from “outperform”.

Other realty stocks fell on concern that credit markets will worsen after JPMorgan Chase & Co. said UBS AG UBS probably sold 25 billion francs of mortgage-backed securities in a ``fire sale ''''. Mitsubishi Estate Co tumbled 7.09% and Mitsui Fudosan shed 6.97%.

Financial stocks fell as well. Resona Holdings plunged 2.99% and Mizuho Trust & Banking edged down 3.70%.

Commodity stocks also fell on declining metal prices. Copper prices climbed down 2% in New York yesterday, while platinum fell 3.3%. Nippon Light Metals fell 2.53% on the news.

Pioneer Corp and Matsushita in tie-up

The Nikkei news reported yesterday that Pioneer Corp and Matsushita Electric Industrial Co. plan to co-develop plasma panels thereby widening a proposed business alliance centered on procurement.

Separately, Nikkei News reported today that Pioneer Corp. will probably report a net loss of 8 billion yen for the year through March 31, after taking a 20 billion yen charge to withdraw from the plasma TV business.

JFE to increase stake in Hitachi Zosen

The online edition also reported that JFE Holdings Inc. is pushing to acquire its 50-50 joint venture with Hitachi Zosen Corp. on expectations of massive overcapacity in East Asia''s shipbuilding industry.

Caterpillar to shore up stake in JV

The Chicago business reported yesterday quoting the Nikkan Kogyo newspaper that the world’s biggest maker of earthmoving equipment will spend 60 billion yen to raise its stake in Shin Caterpillar Mitsubishi-its joint venture with Mitsubishi Heavy Industries- from 50% to approximately 63%.

Shin Caterpillar Mitsubishi produces and sells hydraulic excavators, wheel loaders and bulldozers.