BoJ Left Rates at 0.5%, Nikkei Falls

123jump.com Staff
20 May, 2008
New York City

Stocks in Japan declined on the worries that the current U.S. credit market malaise in the U.S. could drag earnings of Japanese companies. Nikkei 225 index fell 0.8% to 14,160. According to a report issued by the Ministry of Industry and Trade, demand for services in March rose 0.3% after a revised demand increase of 1.6% in February. The Bank of Japan left its key interest rate at 0.5% and said that corporate profits are leveling and economic growth is slowing on rising commodities prices.

[R]5:00AM New York, 7:00PM Tokyo - Japan’s demand for services increase 0.3% in March. The Bank of Japan keeps key rate at 0.5%.[/R]

Stocks in Japan declined led by homebuilders after Credit Suisse cut its rating on developers to “underweight” from “market weight”'' on speculation that a fall in bank lending will lower home building activities.

In Tokyo trading Nikkei 225 fell 0.77% or 109.52 at 14,160.09, and the broader Topix Index dropped 0.3% or 4.41 to 1,399.84.

In the first section of the Tokyo Stock Exchange 10.8 billion shares worth 1 trillion yen were traded and in the second section 214 million shares valued at 6.3 billion yen changed hands.

Of the Nikkei 225 stocks 83 gained, 135 declined, and 7 were unchanged. Kobe Steel led advancers in the index shares with a gain of 6.98% after Credit Suisse raised its rating on the stock to “outperform” from “neutral”.

Other steel makers also rose as well. Japan Steel increased 4.98%.

Japan’s service demand increases 0.3% in March

The Ministry of Industry Economy and Trade reported in its report on the Indices of Tertiary Industrial Activity and Indices of All Industrial Activity published on its Web site today that the demand for services increased 0.3% to a seasonally adjusted 108.8 in March from a revised 1.6% in February.

Industries that mainly contributed to the rise include: Compound services rising 9.8%; real estate gaining 2.6%; services increasing 3.5%; finance and Insurance up 1.5% and wholesale and retail trade; eating, drinking places and accommodation and medical, healthcare and welfare gaining 0.4%, 1.6% and 0.9% respectively. Learning support also edged up 6.6%.

Industries that mainly contributed to the decline were Information and Communications down 3.7%, Electricity, gas, heat supply and water declined 5.1% and transport plummeting 0.7%.

The Bank of Japan keeps interest rates on hold

The Bank of Japan reported that it has elected to keep its key rate on hold at 0.5%.

Separately, the Bank reported in its monthly report that Japan’s economic growth is slowing due to higher energy and raw material prices, adding those corporate profits have begun to level off, even though at a high level. However, housing investment has been “recovering moderately”.

According to the report, while the financial environment continues to be accommodative, credit demand in the financial services sector has continued to be more or less flat.

Gainers & Losers

Kobe Steel led advancers in the Nikkei 225 index shares with a rise of 6.98% followed by increases in Sumitomo Metal Industries of 6.34%, in Mitsui Engineering & Shipbuilding of 6.18%, in Mitsubishi Motors Co. of 5.75%, and Mitsubishi Heavy Industries of 5.32%.

Kobe Steel gained after Credit Suisse upgraded the stock from “neutral” to “outperform” and rival Japan Steel Works edged up 5% as well.

Mitsubishi Metal Industries rose after metal prices gained on a sliding dollar, with gold prices reaching a record high of $913.35 per ounce yesterday.

Mitsui Engineering & Shipbuilders increased after the Baltic Dry Index, which measures ocean freights for commodities gained 2.2 % in London yesterday as contracts to build nearly 100 vessels have been cancelled in the last three months to transport iron ore and coal. Hitachi Zosen gained 3.68% on the news.

Sumitomo Realty led decliners in the Nikkei 225 index shares with a fall of 4.7% followed by losses in Advantest Corp. of 4.5%, in Chiyoda Corp. of 4.3%, in Tokyu Land Corp. of 4.2%, and Shinko Securities of 4.1%.

Sumitomo Realty declined after Credit Suisse cut its rating on developers from “market weight” to “under-weight” on the tightening of credit conditions in the the sector.

Other developers also dropped, Heiwa Real Estate shed 4% and Mitsubishi Estate Co. edged down 3.63%.