BOJ Holds Rate, Tokyo Stocks Fall

123jump.com Staff
13 Jun, 2008
New York City

The Bank of Japan left its key rate at 0.5% and issued a cautionary note on the corporate profit growth. The central bank also noted that exporters are facing deteriorating trade terms. Furukawa led advancers in the Nikkei 225 index shares with a gain of 5.80% followed by rises in Fujikura Ltd. of 5.34%. Mitsubishi Paper led decliners in the Nikkei 225 index shares with a drop of 5.40% followed by losses in Hokuetsu Paper of 5%.

[R]5:00AM New York, 7:00PM Tokyo – The Bank of Japan holds key rate at 0.5%.[/R]

Stocks in Japan rose driven by strong retail data in the U.S. and a weakening yen lifted exporters. Metal stocks also increased on rising metal prices. Paper companies however limited gains.

Market sentiment

In Tokyo trading Nikkei 225 rose 0.61% or 85.13 at 13,973.73, and the broader Topix Index increased 1.6% or 8.43 at 1,371.57.

In the first section of the Tokyo Stock Exchange 20.4 billion shares valued at 2.7 trillion yen traded and in the second section 268 million shares valued at 3.6 billion yen changed hands.

Of the Nikkei 225 stocks 127 gained, 85 declined, and 13 were unchanged. Furukawa Electric led advancers in the index shares with a rise of 5.80% followed by Fujikura Ltd gaining 5.34%.

Bank of Japan keeps rate on hold

The Bank of Japan reported on its web site today that the collaterized overnight call rate will remain at 0.5% after a unanimous vote.

Separately, the bank reported in its Monthly Report of Recent Economic and Financial Developments that the economic growth is slowing in the wake of high oil prices and rising raw material costs. And, it noted that corporate profits have been falling recently owing to “the deterioration in the terms of trade”.

In addition, the central bank expects the economy to grow at a slower pace in the short term and grow moderately thereafter, while corporate profits are also forecasted to decline “for the time being”. However business fixed investment and private consumption is expected to remain firm.

According to the report, the recovery in housing investment is expected to gradually fade and public investment is projected to be on a downtrend. The financial environment for corporate finance continues to be accommodative.

US retail sales increase 1% in May

The US Department of Commerce reported yesterday that retail sales increased 1%, the largest one month increase since November last year. Sales in the three-month period ending in May 2008 were revised upwards to 2.6% from the same period a year ago.

Gainers & Losers

Furukawa led advancers in the Nikkei 225 index shares with a gain of 5.80% followed by rises in Fujikura Ltd. of 5.34%, in T& D Holdings of 4.29%, in Japan Tobacco of 4% and Mitsui Sumitomo Insurance Group of 3.69%.

Energy stocks also rose as crude oil prices increased above $136 a barrel. Inpex Holdings gained 3.10% as a result.

Automakers advanced on the better than expected retail sales increase and the yen weakened from 107.70 yesterday to 107.91 at the close of trade today. Honda spiked 3.23%, Mazda Motor Corp edged up 2.74% and Sony advanced 1.56%.

Mitsubishi Paper led decliners in the Nikkei 225 index shares with a drop of 5.40% followed by losses in Hokuetsu Paper of 4.99%, in OJI Paper of Co. of 4.33%, in GS Yuasa Corp. of 4.18%, and Nippon Paper Group of 4%. Paper companies fell as oil prices increased.

Shipping lines fell as the Baltic Dry Index, which gauges freight costs, plummeted 8.7%. Mitsui OSK Lines dropped 3.96% and Kawasaki Kisen plunged 3.29%.

Asian markets

In Tokyo Nikkei 225 Index closed higher 85.13 or 0.61% to 13,973.73, in Hong Kong Hang Seng index decreased 431.56 or 1.87% closed to 22,592.30. In Australia ASX 200 index higher 48.90 or 0.92% to close 5,378.10. In Malaysia KL Composite index increased 3.81 or 0.31% closed to 1,229.35.

In South Korea Kospi Index increased 7.99 or 0.46% to close at 1,747.35, in Thailand SET index closed lower 8.16 or 1.03% to 782.64 and Indonesia JSE Index edged decreased 10.59 or 0.44% to 2,398.42. Sensex index in India decreased 60.58 or 0.40% to 15,189.62.