Japan Rates on Hold; Insurers Rise

123jump.com Staff
11 Aug, 2009
New York City

The Bank of Japan left its key rate unchanged in a unanimous vote and left its economic assessment unrevised. The central bank highlighted downside risks to the economy until the final demand improves. Insurers gained on earnings. Earthquake related stocks closed higher.

[R]9:00 PM Tokyo, 7:00 AM New York – The Bank of Japan left its key rate unchanged in a unanimous vote and left its economic assessment unrevised. The central bank highlighted downside risks to the economy until the final demand improves. Insurers gained on earnings. Earthquake related stocks closed higher.[/R]

The Policy Board of the Bank of Japan by a unanimous vote left the key uncollateralized lending rate at 0.1%. The accompanying statement from the central bank highlighted downside risks to the economy.

At the press conference after the meeting, the Governor Shirakawa highlighted that the final demand needs to improve before the economy returns to sustainable growth.

The statement noted that exports and production are improving but consumer spending is sluggish and corporate demand is likely to be weak once the inventory replenishment is completed.

The cautious outlook from the central bank prompted several analysts in Tokyo to predict that interest rates will remain low well into 2010.

The bank also estimated that consumer prices will keep declining when measured to last year as petroleum prices fall. The bank also left its economic assessment unchanged and said that until the global financial markets recover the economic activity will be “influenced by the developments in final demand.”

Trading Activity

The Nikkei 225 Index in Tokyo closed higher 61.20 or 0.58% to 10,585.46 and yen increased to 96.79 to a dollar after the central bank decision.

Of the stocks in the benchmark index, 225 increased, 66 decreased and 21 were unchanged.

Construction and building industry related stocks increased after an earthquake of 6.5 magnitude hit near the main island Honshu.

Fudo Tetra Corp increased 5.1% to 82 yen, Mitsubishi Construction surged 5.6% to 413 yen and Nissei Build soared 9.1% to 72 yen.

Nippon sheet Glass jumped 9.2% to 355 yen and Asahi Glass increased 6.2% to 853 yen after Merrill Lynch increased ratings on both companies citing the recent price improvements in European markets.

Mitsui Sumitomo increased 2% to 2,615 yen and Aioi surged 4.2% to 477 yen on earnings.

Mitsui Sumitomo first quarter earnings net income surged 36.9% to 32.18 billion. Marine insurance premium declined 25% and voluntary automobile insurance premium which is 44% of total revenues declined 2.6% in the quarter.

Aioi Insurance Company Limited first quarter net income surged 334% to 10.57 billion yen. Net premium written in the quarter decreased 6.2% to 203.1 billion yen. The insurer estimates net profit in the second quarter to declined 48% to 3 billion yen.

Fuji Fire & Marine jumped 15% to 138 yen after it reported gain in security holding compared to a loss in the year ago period. The insurer is expected to release earnings on Friday this week.

Asian Markets Review

The Nikkei 225 Index in Tokyo closed higher 61.20 or 0.58% to 10,585.46, Hang Seng index in Hong Kong increased 144.69 or 0.69% to 21,074.21 and CSI 300 index in China higher 11.84 or 0.33% to 3,556.38. ASX 200 index in Australia increased 27.90 or 0.65% to 4,332.00. The FTSE Bursa KL Composite index in Malaysia closed lower 1.72 or 0.14% to 1,186.28.

The Kospi Index in South Korea increased 3.10 or 0.20% to close at 1,579.21. SET index in Thailand closed lower 0.73 or 0.11% to 643.02 and JSE Index in Indonesia increased 9.71 or 0.41% to 2,399.28. The Sensex index in India increased 64.82 or 0.43% to 15,074.59.

Nikkei 200 Average Movers

Astellas Pharma Inc led the decliners in the Nikkei 225 index of 4.9% followed by losses in Mitsubishi Rayon Co Ltd of 3.6%, in Mitsumi Electric Co Ltd of 3.6%, in Taiyo Yuden Co Ltd of 2.7% and in TDK Corp of 2.5%.

Nippon Sheet Glass Co Ltd led gainers in the Nikkei 225 index with a rise of 9.2% followed by gains in GS Yuasa Corp of 7.4%, in Meidensha Corp of 6.6% and Asahi Glass Co Ltd of 6.2%.