Japan Left Rate at 0.1%; Offered Positive Views

Darlington Musarurwa
22 May, 2009
New York City

Investors overlook positive comments from the Bank of Japan after it left its key lending rate unchanged. The prospect of near term downward debt rating for UK and longer term for the U.S. raised worries that higher yen will lower earnings of Japanese exporters.

[R][8:00 PM Tokyo, 9:00 AM New York – Investors overlook positive comments from the Bank of Japan after it left its key lending rate unchanged. The prospect of near term downward debt rating for UK and longer term for the U.S. raise worries will force yen higher and lower the earnings of Japanese exporters.[/R]

The Bank of Japan left its kept its lending rate unchanged around 0.1% and offered positive view for the economic recovery at the end of 2009.

The central bank also widened the eligible collateral to include sovereign debts of US, UK, Germany and France and.

In the accompanying policy decision statement, the bank noted, “Economic conditions have been deteriorating, but exports and production are beginning to level out against the backdrop of progress in inventory adjustments both at home and abroad.”

The statement noted that private demand is expected to remain weak but exports and production are likely to stabilize as the conditions in global economies find equilibrium. The policy committee noted, “Exports and production, after leveling out, are expected to start recovering and public investment to increase. Therefore, the pace of deterioration in economic conditions is likely to moderate gradually, leading to a leveling out of the economy.”

Stocks were weak in Tokyo trading as debt downgrades alarm for the UK sent waves of speculation of similar future action for the U.S. sovereign debts. The lowered rating for the U.S. debt will strengthen yen further depressing earnings of Japanese exporters.

The Nikkei 225 Index in Tokyo closed lower 38.34 or 0.41% to 9,225.81.

Gainers & Losers

Exporters led the decliners in Tokyo trading. Toyota Motor declined 2.2% to 3,570 yen, Canon fell 1.9% to 3,170 yen, Sony Corp lost 2% to 2,450 yen and Honda edged higher 0.4% to 2,710 yen.

Auto parts and accessories makers were in focus. Bridgestone declined 2.5% to 1,411 yen after the tire maker along with several others in the industry are looking for debt guarantees from General Motors and Chrysler LLC.

Nippon Sheet Glass declined 3.4% to 256 yen, Alps Electronics fell 3.1% to 497 yen and Denso Corp edged 3.1% to 2,190 yen.

Dividend related stocks closed higher. Japan Tobacco increased 1.7% to 277,400 yen and recently the company in its earnings announcement suggested that dividend of 5,600 yen or a payout ratio excluding goodwill amortization to reach 27.2%.

Central Japan Railway Company increased 2.9% to 644,000 as Mitsubishi UFJ Securities lifted its rating on the company. The news was first reported by newratings.com and Bloomberg News. The high speed train operator plans to pay 9,000 yen dividend, an increase of 500 yen from the previous year. The payout ratio is increased to 14.1% from 10.5% in the previous fiscal year.

Earnings News

Ohara Inc, the maker of optical glass reported full-year sales fell 24% to ¥20.00 billion from ¥26.30 billion a year ago.net loss in the year was ¥970 million compared to net profit of ¥1.37 billion a year ago.

Nikkei 200 Average Movers

Nippon Suisan Kaisha Ltd. led the decliners in the Nikkei 225 index of 4.8% followed by losses in Mitsubishi Rayon Co Ltd of 3.9%, in Nisshinbo Holdings Inc. of 3.8 %, in Nippon Sheet Glass Company, Limited of 3.4% and in JTEKT Corporation of 3.3%.

Pioneer Corp. led gainers in the Nikkei 225 index with a rise of 8.3% followed by gains in Sanyo Electric Co Ltd. of 7.5%, in IHI Corporation, of 6.9% and Fujikura Ltd. of 4.7%.

Asian Markets Review

The Nikkei 225 Index in Tokyo closed lower 38.34 or 0.41% to 9,225.81, Hang Seng index in Hong Kong decreased 136.97 or 0.80% closed to 17,062.52, CSI 300 index in China lower 9.33 or 0.34% closed to 2,740.68. ASX 200 index in Australia decreased 52.30 or 1.37% closed to 3,761.60. The KL Composite index in Malaysia higher 9.70 or 0.94% closed to 1,045.26.

The Kospi Index in South Korea decreased 17.90 or 1.26% to close at 1,403.75. SET index in Thailand closed higher 5.25 or 0.96% to 554.02 and JSE Index in Indonesia decreased 4.01 or 0.21% closed to 1,881.71. The Sensex index in India increased 150.61 or 1.10% closed to 13,887.15.