Rates on Hold in Japan; Deflation Talks

Darlington Musarurwa
20 Nov, 2009
New York City

Bank of Japan keeps rate at 0.1%. Deputy Prime Minister declares Japan has slipped into deflation. Semiconductor related stocks declined after Dell reported third quarter profit decline of 54%.

5:00 AM New York, 7:00 PM - Bank of Japan keeps rate at 0.1%. Deputy Prime Minister declares Japan has slipped into deflation. Semiconductor related stocks declined after Dell reported third quarter profit decline of 54%.[/R]

Japan stocks were mixed after the country declared that it was in deflation.

Investors also dumped chip makers as Dell profit declined more than estimated.

In Tokyo trading Nikkei 225 Index fell 0.5% or 51.79 to 9,497.68, and the broader Topix Index rose 0.1% to 838.71.

In the first section of the Tokyo Stock Exchange 10.5 billion shares worth 608 billion yen were traded and in the second section 290 million shares valued at 2.9 billion yen changed hands.

Of the Nikkei 225 index stocks, 107 increased, 104 declined, and 14 were unchanged. Mitsubishi Chemical led gainers in the index shares with a rise of 9.2% followed by T&D Holdings gaining 5.7%.

The yen fell 0.03 to 88.87 against the dollar.

Bank of Japan Keeps Rates on Hold

Bank of Japan reported left its key lending rate unchanged at 0.1%.

According to the central bank, the momentum of self-sustaining recovery in domestic private demand remains weak.

The pace of improvement of the economy is expected to remain moderate until the middle of fiscal 2010.

The statement noted, “In the conduct of monetary policy, the Bank will aim to maintain the extremely accommodative financial environment. The Bank will provide steady support for Japan’s economy to return to a sustainable growth path with price stability.”

Japan Declares Deflation

Nikkei News reported that Japan’s Deputy Prime Minister Naoto Kan, who is also the minister for economic and fiscal policy, said the country has slipped into deflation.

Kan said government will work closely with the Bank of Japan to avoid compromising “tentative improvements in economic activity.”

The report notes that Japan’s finance minister Hirohisa Fujii said separately it was difficult to deal with deflation from a fiscal point of view, citing that any intervention must come from the private sector.

Dell’s Q3 Profit Falls 54%

Dell reported third quarter profit declined 54% to $337 million from $727 million in the same period a year ago on slackening global demand.

Net revenues dropped 15% to $12.9 billion as product revenue plummeted 17% in the period. Analysts were looking for revenues of at least $13 billion.

Gross margin declined 17.3% from 18.8%.

The report also notes revenue from desktop personal computers fell 26%, while in the consumer segment sales to large enterprises dropped 23% and sales to small and medium businesses declined 19%.

However, Dell expects profits to recover. The company recently acquired Perot Systems for $3.9 billion.

Gainers & Losers

Mitsubishi Chemical led gainers in the Nikkei 225 index shares with a rise of 9.2% followed by increases in T&D Holdings of 5.7%, in Teijin Ltd. of 5.2%, in Fuji Heavy Industries of 4.9%, in Mitsubishi Rayon Co. of 4.8%.

Hino Motors led decliners in the Nikkei 225 index shares with a decline of 4.2 % followed by losses in Fast Retailing of 3.3%, in Mitsubishi Motors of 3.3%, in Nitto Boseki Co. of 3.2%, and Japan Airlines of 3.1%.

Energy stocks fell as crude oil prices slumped 2.7% to $77.5 per barrel. Inpex declined 3% to 712,000 yen.