Japan Takes Softer Bank Regulatory Stance

Darlington Musarurwa
10 Nov, 2009
New York City

Stocks in Japan closed higher led by a rise in domestic banks. Comments from regulators suggested a flexible approach for the capital adequacy at local banks. Government is preparing a supplemental budget of 3 trillion yen. Government plan to rescue JAL is likely to be ready by Friday.

[R]5:00 AM New York, 7:00 PM Tokyo – Stocks in Japan closed higher led by a rise in domestic banks. Comments from regulators suggested a flexible approach for the capital adequacy at local banks. Government is preparing a supplemental budget of 3 trillion yen. Government plan to rescue JAL is likely to be ready before the end of this week.[/R]

The benchmark stock index rose 0.6% after Japan trade surplus rose in September.

Financial Services Minister Shizuka Kamei said that Japan will not punish domestic banks if their capital adequacy ratios fall below acceptable capital ratio of 4% temporarily.

In Tokyo trading Nikkei 225 Index rose 0.6% or 61.74 to 9,870.73, and the broader Topix Index gained 0.2% to 872.44. Local banks rallied after comments from Kamei.

In the first section of the Tokyo Stock Exchange 8.4 billion shares worth 570 billion yen were traded and in the second section 431 million shares valued at 3.6 billion yen changed hands.

Of the Nikkei 225 index stocks, 123 gained, 89 declined, and 13 were unchanged. Taiyo Yuden led gainers in the index shares with a rise of 5.5% followed by Nippon Sheet Glass gaining 5.2%.

The yen fell 0.2% to 89.92 against the dollar.

Supplementary Budget of 3 Trillion Yen

Nikkei News reported today the deputy prime minister Naoto Kan said that government plans to compile a second extra fiscal 2009 budget of 3 trillion yen.

Kan is also the minister of national strategy and economic policy.

“The government will use the amount saved through project suspensions to improve citizens'' household finances and job conditions,” said Kan.

Trade Surplus Rises 0.2%

Ministry of finance reported today that Japan’s current account surplus edged up 0.2% to 1.57 trillion yen from a year earlier in September.

Current account surplus decreased 27.2% from a year ago as the net income earned abroad after paying the interest to foreign investors on their Japanese assets declined to 1.08 trillion yen.

Economists had earlier projected the surplus to narrow to 1.51 trillion yen.

According to the finance ministry, exports eased 32.1% from a year earlier after falling 37.1% in August.

The current account surplus on a seasonally adjusted basis rose to 1.34 trillion yen in September.

Government Finalising JAL Rescue Plan

Nikkei News reported today that government is finalising a rescue package for Japan Airlines Corp. and has reached a position on key pension and bridge loan issues.

Government will not be guaranteeing bridge loans to the airline.

An announcement on the injection of the public funds is expected before the company reports its interim financial results on Friday.

The report notes that Japan is considering special legislation to allow for mandatory reduction in high pension benefits, which is regarded as a pre-condition to the cash injection.

Minister of land, infrastructure, transport and tourism Seiji Maehara said, “Currently, the major points of our discussions are on the bridge loans and pension issue.”

Gainers & Losers

Taiyo Yuden led gainers in the Nikkei 225 index stocks with a rise of 5.5% followed by increases in Nippon Sheet Glass of 5.2%, in Fast Retailing of 4.9%, in Japan Tobacco of 4.5%, and Casio Computer of 4.4%.

Sanyo Electric led decliners in the Nikkei 225 index stocks with a fall of 5.2% followed by losses in Trend Micro Inc of 5.2%, in GS Yuasa Corp. of 4.3%, in Isuzu Motors of 4.2%, and Mitsubishi Electric of 3%.

Other Movers

Banks closed higher after Kamei commented that the regulators will permit temporary lack of adequate capital at local banks. Mitsubishi UFJ increased 2.7% to 503 yen and Sumitomo Mitsui Financial Group increased 3.6% to 3,170 yen.

Casio Computer increased 4.4% to 706 yen after Citigroup analysts lifted its rating on the stock.

Dainippon Screen Manufacturing Co surged 7.8% to 385 yen after it revised full year earnings forecast to 12 billion yen.

Fast Retailing surged 4.9% to 16,690 yen.

GS Yuasa Corp decreased 4.3% to 730 yen.

Hoya Corp increased 1.2% to 2,170 yen after Merrill Lynch lifted its target price to 2,500 yen, 43% increase from the previous price.

Japan Tobacco increased 4.5% and Kirin Holdings decreased 1.3% to 1,434 yen.