Japan GDP Up 3.5%, Stocks Rise 2.3%

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

Fourth quarter economic growth in Japan was reported by the Cabinet office at 3.5% beating the estimates of 2.2% or more. The sharp rise in GDP was driven by consumption and growing exports. Separately, The Bank of Japan reported domestic corporate goods price index rose 3.4% in February and export price index fell 5.2%. Nikkei 225 index gained 2.29% or 259.6 at 12,947.88, and the broader Topix Index rose 1.6% or 19.98 to 1,255.13.

[R]5:00AM New York, 7:00PM Tokyo - Tokyo rallies on U.S. led liquidity move and strong fourth quarter GDP growth.[/R]

Japan stock averages increased as the U.S. Federal Reserve in coordination with other G-10 central banks announced plans to inject liquidity in the credit markets. A government report on the fourth quarter economic growth also helped lift stocks.

Market Sentiment

In Tokyo trading Nikkei 225 gained 2.29% or 259.6 at 12,947.88, and the broader Topix Index rose 1.6% or 19.98 to 1,255.13.

In the first section of the Tokyo Stock Exchange 9.5 billion shares worth 1.1 trillion yen were traded and in the second section 675 million shares valued at 17 billion yen changed hands.

Of the Nikkei 225 stocks 187 gained, 31 declined, and 7 were unchanged. Nomura Holdings led advancers in the Nikkei 225 index shares with a rise of 6.72% after the U.S. Federal Reserve unveiled measures to ease credit conditions on the money markets.

U.S. Federal Reserve to add liquidity in the credit markets

U.S. Federal Reserve Bank announced yesterday that it will expand its securities lending program and introduce a new Term Securities Lending Facility (TSLF) to primary dealers in exchange of high grade mortgage debts from government agencies and no-agency rated private label residential mortgage debts.

The new facility- that will lend money for 28 days- will carry out weekly auctions and may inject up to $200 billion of Treasury securities.

The Federal Reserve authorities added that it will increase the currency swap arrangements with ECB by $10 billion to $30 billion and with the Swiss National Bank by $2 billion to $6 billion.

Fourth quarter GDP increases to 3.5%

Japan’s Cabinet Office reported in its second preliminary report on its web site today that Japan’s economy expanded by 3.5% in the fourth quarter, more than the 2.3% forecasted by economists.

Domestic demand was revised downwards to 0.4% from the previously reported 0.3%, while private consumption remained unchanged.

Also, private residential investment declined to 9.3% from the earlier estimate of 9.1% and fourth quarter net exports increased to 0.5% from 0.4% reported earlier.

Fourth quarter GDP in Japan rose at 3.5% and for the year 2007, Real GDP rose at 2.1%. GDP in 2006 rose at 2.4% and in 2005 at 1.9%.

Wholesale price jump 3.4% in February

The Bank of Japan reported in the monthly report on Corporate Goods Price Index published on its web site today that the domestic corporate goods price index increased to 3.4% in February from 3% in January, while the export price index fell 5.2% from a decline of 5.8% in January.

In addition, the import price index rose to 10.9% in February from 7% the previous month.

Japan corporate failures increase

Kyodo news reported today that private research company Tokyo Shoko Research said the number of corporate failures climbed 8.34% in February to 1,194 for the second straight month on a significant number of large bankruptcies.

Gainers & Losers

Nomura Holdings led advancers in the Nikkei 225 index shares with a rise of 6.72% followed by increases in Sumitomo Mitsui Financial Group of 6.40%, in Citizen Holdings of 6.19%, in Sumitomo Trust & Banking of 5.74%, and in Fuji Electric House of 5.66%.

Other financial stocks gained as well. Mitsubishi UFJ Financial Group rose 4.74%, Resona Holdings gained 4.29% and Mizuho Financial Group advanced 4.03%.

Sky Perfect JSAT led decliners in the Nikkei 225 index shares with a fall of 4.19% followed by losses in Japan Tobacco of 3.51%, in Ajinamoto Co. Inc. of 2.24%, in Marui Group of 2.17%, and in Daiichi Sankyo of 2.16%.

Company News

Mitsubishi Heavy Industries expects profit to double

Bloomberg news reported today that managing executive officer in charge of shipbuilding at Mitsubishi Heavy Industries Shiro Iijima said earnings at its shipyard building operation will probably double next fiscal year to 10 billion yen as demand from China increases.

Carmakers raise wages

Carmakers Toyota Motor Corp. and Honda raised wages for the third straight year after concluding this year’s “shunto” spring wage talks with labor unions.