Tokyo Surge in 3-day Rally; Stimulus of 5 T Yen

123jump.com Staff
30 Oct, 2008
New York City

Stocks in Japan soared 10% after the U.S. Fed lowered interest rate by 0.5% to 1%. Nikkei 225 surge capped a three-day rally of 26%, the largest gain thirty five years. Prime minister is expected to unveil a 5 trillion yen stimulus package to stimulate consumer spending.

[R]5:00AM New York, 7:00PM Tokyo- Japan unveils 5 trillion yen stimulus package.[/R]

Japan stocks soared 10% after the U.S. Federal Reserve cut its base rate to 1%. The rate cut lifted the prices of metals and crude oil on the hopes that the latest cut will sustain consumer demand.

Japan government is expected to unveil a 5 trillion stimulus package to bolster consumer spending.

The Nikkei 225 index surged 26% in a 3-day rally, the largest since July 1970 according to the data available on the Tokyo Stock Exchange and Nikkei News.

In Tokyo trading Nikkei 225 rose 9.9% or 817.86 to 9,029.76, and the broader Topix Index advanced 8.3% or 69.05 to 899.37.

In the first section of the Tokyo Stock Exchange 11.2 billion shares worth 844 billion yen were traded and in the second section 119 million shares valued at 1.5 billion yen changed hands.

Of the Nikkei 225 index stocks 218 rose and 7 declined. Mazda led advancers in the index stocks with a rise of 24.8% after the yen dropped 1.4% to 98.75 per dollar and slid 3.7% to 130.91 against the euro.

Japan in 5 trillion Yen Stimulus Package

Daily Yomiuri Online reported that Prime Minister Taro Aso will today announce a 5 trillion yen economic stimulus package larger than 1.8 trillion yen size estimated in August.

Government will provide 2 trillion yen benefits to households with each household receiving 38,000 yen.

Income and residential taxes will be lowered by a record 6 million yen per person for those with housing loans of 50 million yen or less. Government will budget 600 billion yen for this intervention.

According to the report, a fixed-price expressway toll system will be introduced through which expressway users are charged 1,000 yen on Saturday, Sundays and national holidays, regardless of the distance traveled.

An estimated 500 billion yen will be used for the highway toll system which is expected to continue through to 2010.

In addition, tolls for all kinds of vehicles, including trucks, will be cut by 30% on weekdays, while the Shuto Expressway and the Hanshin Expressway will not be subjected to rate reductions.

Under the plan, Japan will consider subsidies for farmers that reduce their rice paddy area and cut into the employment insurance rate.

More credit guarantees is likely to be provided to small and midsize firms. Aso intends to submit a second additional budget for fiscal 2008 to cover the cost.

Funding will be sponsored from the reserves in the government loan and investment program special account and unused funds will be kept for interest payments for construction and government bonds.

U.S. Fed Reserve Cuts to 1%

U.S. Federal Reserve yesterday lowered its base rate by half percentage points to 1%. The widely expected rate cut lifted the mood in trading briefly but lower rates from the Fed have not translated into lower loan rates for consumers and businesses. The spreads between the rates at which the bank lend to each other and to consumers and the rate at which it borrows from the Fed have remain at elevated levels.

The Fed has lowered rates to the level last seen during 2003 and 2004 period but consumer confidence remains the weakest in several decades.

U.S. inflation is expected to moderate in the coming quarters as energy prices and commodities decline.

Commented the central bank in a statement, “Recent policy actions, including today''s rate reduction, coordinated interest rate cuts by central banks, extraordinary liquidity measures, and official steps to strengthen financial systems, should help over time to improve credit conditions and promote a return to moderate economic growth.”

Gainers & Losers

Mazda led advancers in the Nikkei 225 index stocks with a rise of 24.8% followed by rises in Pac Metals of 22%, in Toho Zinc of 21.5%, in Sumitomo Trust & Banking of 21.3%, and Okuma Corp. of 21.2%.

The yen declined 1.4% to 98.75 per dollar and fell 3.7% to 130.91 against the euro.