Japan Stocks Struggle, JAL Net Drops

123jump.com Staff
07 Nov, 2008
New York City

Global economic worries and lowered IMF estimates of global growth played into early sell-off of 7% in Tokyo trading. Stocks recovered to close down 3.6% for the day and 0.1% for the week. Japan Airlines second quarter operating profit fell to 26.3 billion yen from 65 billion yen a year ago.

[R]5:00AM New York, 7:00PM Tokyo - Japan''s economy forecasted to fall 0.2% in 2009. Nikkei rises 0.1% for the week.[/R]

Stocks in Japan trimmed a 7% plunge in the morning session to close down 3.6% dragged by a bearish global economic outlook from the International Monetary Fund. Fears of a global recession dragged commodity stocks lower as oil and metal prices fell.

Automakers fell as Toyota Motor Corp. lowered its annual profit forecast for the year ending in March 2009 by 68% to 550 billion yen.

In Tokyo trading Nikkei 225 fell 3.6% or 316.14 to 8,583.00, falling 0.1 for the week, and the broader Topix Index shed 3.3% or 30.30 to 879.00, declining 1.4% in the week.

In the first section of the Tokyo Stock Exchange 10 billion shares worth 796 billion yen were traded and in the second section 197 million shares valued at 1.6 billion yen changed hands.

Of the Nikkei 225 index stocks 25 gained, 197 declined, and 3 were unchanged. GS Yuasa Corp. led gainers in the index shares with a rise of 8.7% followed by Japan Steel Work gaining 5.6%.

IMF Lowers Japan Economic Growth Rate

The International Monetary Fund reported yesterday in its latest world economic outlook report that Japan''s economy is expected to ease to 0.5% in 2008 and shrink 0.2% next year. IMF defines a recession as economic growth below 2.5%.

Japan''s support to growth from net exports is forecasted to decline.

The Fund also cut the world economic growth outlook by 0.2% to 3.7% in 2008 and lowered growth by 0.8% to 2.2 for 2009.

U.S. economic growth is projected to fall to 1.4% this year to declined 0.7% in 2009, while advanced and emerging economies are forecasted to drop from a rise of 1.4% to a decline of 0.3% and from a rise of 6.6% to 5.1% respectively.

Financial stress is likely to be more pronounced than the October world economic outlook report notwithstanding the interventions made to forestall systemic risk.

The IMF says financial markets have slipped into a vicious cycle of deleveraging of assets, price declines and investor redemptions.

Baseline petroleum prices are expected to ease from the October projection of $100 to $68 per barrel in 2009.

Japan to Ease Capital Adequacy of Banks

Nikkei News reported that the country will relax regulation on the capital adequacy of banks and other financial institutions to prevent conditions from further deteriorating in the credit markets.

Gainers & Losers

GS Yuasa Corp. led advancers in the Nikkei 225 index shares with a rise of 8.7% followed by increases in Japan Steel Work of 5.6%, in Shionogi & Co. of 4.9%, in Nichirei Corp. of 4.2%, and Ajinomoto Co. of 3.8%.

Denso Corp. led decliners in the Nikkei 225 index shares with a fall of 13.5% followed by losses in Showa Denko KK of 13.5%, in NSK Ltd. of 13.3%, in Chiyoda Corp. of 11.2%, and JTEKT Corp. of 11.1%.

Denso Corp, which supplies critical parts to Toyota, fell after Toyota Motor Co. revised its full-year profit forecast for the year ended April 1 by 68% to 550 billion yen.

The automakers'' revenues slid 12.5% to 23 trillion yen.

Other carmakers declined as well. Mazda Motor Corp. plunged 9.8%, Toyota dropped 9.8%, and Hino Motors shed 9.2%.

Inpex dipped 8.9% after crude oil prices for Delivery lost 6.9% to $60.77 per barrel.

Earnings Review

Japan Airlines reported today that operating profit in the quarter ended September 30 fell to 26.3 billion yen from 65.2 billion yen in the same period a year ago.

Sales in the quarter also plummeted to 583 billion yen from 622 billion yen a year earlier.

The airline forecasts that operating profit in the year through March will drop 44% to 28 billion yen from 50 billion that was projected earlier.

However the company kept its full year net income estimate unchanged at 13 billion yen after getting 41.2 billion yen from the sale of a stake in its airline card unit to Mitsubishi UFJ Financial Group.