Japan Leads Asia Rally

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

Stocks in Japan rallied tracking the gains in the U.S. Other Asian markets gained as well. The Federal Reserve Bank lowered its benchmark rate 0.75% to 2.25%, lowest in the last three years. The decision lifted financial stocks in Japan and across Asia. In Tokyo trading Nikkei 225 increased 2.48% or 296.28 to 12,260.44, and the broader Topix Index gained 2.8% or 32.67 to 1,196.30.

[R]5:00AM New York, 7:00PM Tokyo – Japan stocks rallied after the U.S. Fed cut rates to 2.25%. Upper house of the Diet rejected second nomination for the Bank of Japan governor.[/R]

Stocks in Japan rose spurred by the U.S. Federal Reserve rate cut and forecast-beating results from Lehman Brothers and Goldman Sachs. A weaker yen also provided added impetus to exporters.

In Tokyo trading Nikkei 225 increased 2.48% or 296.28 to 12,260.44, and the broader Topix Index gained 2.8% or 32.67 to 1,196.30.

In the first section of the Tokyo Stock Exchange 9.6 billion shares worth 1 trillion yen were traded and in the second section 350 million shares valued at 5.3 billion yen changed hands.

Of the Nikkei 225 index shares 195 advanced, 18 declined and 12 were unchanged. Shinko Securities led gainers in the Nikkei 225 index shares with a rise of 8.74% followed by Nomura Holdings increasing 8.70%.

U.S. Federal Reserve slashes key rate

The U.S. Federal Reserve yesterday cut its key short-term target rate by three quarters of a percentage point to 2.25% in an attempt to bolster the financial markets that have been plagued by the credit market turmoil.

The Fed while sounding cautionary note on inflation also indicated that rates may be lowered in the future if economy weakens more. The Fed’s willingness to please financial markets at the expense of inflation, dollar, and inflation has several economists worried.

While the Fed is lowering interest rate and accepting weak collateral, which is nothing but bailout of banks, it will only increase long term inflation rate and may encourage banks to make more bad loans.

Lehman Brothers and Goldman Sachs beat estimates

Lehman Brother reported yesterday its first quarter profit topped $489 million, while earnings dropped 57% to 89 cents per share. The drop is however less than 72 cents a share earlier forecasted.

Goldman Sachs reported a profit of $3.23 a share on $8.34 billion in revenue, which is less than half of the $6.67 per share it earned in 2007. Analysts had expected $2.58 a share on $7.3 billion.

Upper House rejects Tanami nomination

The Kyodo news online reported that Japan’s upper house today rejected Prime Minister Yasuo Fukuda’s nomination of Koji Tanami for the post of Bank of Japan Governor, which becomes vacant today after Toshihiko Fukui’s term expires.

Analysts are speculating that Masaaki Shirakawa will act as the interim bank of Japan chief if the stalemate persists.

The Bank of Japan is likely to be without a new governor appointment for the first time in the last sixty five years. The current lack of consensus on the nominee only reflects a divided power between the upper and lower houses of Diet.

Passenger car sales set to rise

Japan Automobile Manufacturers Association reported today that sales of passenger cars may increase 0.4% to 4.43 million vehicles in the business year starting April 1, on 1.3% jump in mini-cars. However, vehicle sales are expected to drop 0.6% as demand for trucks declines 5.3%.

Gainers & Losers

Shinko Securities led advancers in the Nikkei 225 index shares with a rise of 8.74% followed by rises in Nomura Holdings of 8.70%, in Daikin Industries of 8.20%, in J Front Retailing of 7.61%, and Ebara Corp. of 7.46%.

Nomura Holdings and other financial stocks gained after Lehman Brothers and Goldman Sachs first quarter earnings beat estimates. Mitsubishi UFJ Financial Group gained 5.44%, Mizuho Financial Group advanced 2.96% and Sumitomo Mitsui edged up 4.95%.

Exporters also gained after the U.S. dollar rose from 97.13 yesterday to 99.08 against the yen, driven by the Fed rate cut. Sony Corp. increased 6.80% and Canon rose 6.28%.

Nisshinbo Industries led decliners in the Nikkei 225 index shares with a drop of 5.52% followed by losses in Inpex Holdings of 3.54%, in T&D Holdings Inc. of 3%, in Nippon Oil Corp. of 1.59%, and Daiichi Sankyo of 1.58%.

Wal-Mart to buy rest of Seiyu

The Associated Press reported today that Wal-Mart will buy the remaining 4% it doesn’t already own in Japan’s fifth largest retailer Seiyu.

Wal-Mart has more than 4,000 domestic stores and about 3,000 stores outside the United States.