Deflation Talks Rattle Japan Markets

Darlington Musarurwa
24 Nov, 2009
New York City

Banks in Japan closed lower on the worries that more capital will be needed to meet regulatory requirements. Talks of deflation rattled investors. Mitsubishi UFJ Financial Group Inc plans $11 billion offering for the second time this year. The troubled airline JAL restructuring face hurdles.

[R]5:00 AM New York, 7:00 PM Tokyo – Banks in Japan closed lower on the worries that more capital will be needed to meet regulatory requirements. Talks of deflation rattled investors. Mitsubishi UFJ Financial Group Inc plans $11 billion offering for the second time this year. The troubled airline JAL restructuring face hurdles.[/R]

Japan stocks extended losses on worries financial stocks will sale shares as the country slipped into recession. Investors were also unnerved as the troubled airline JAL is still struggling with the restructuring plan.

The Cabinet Office in a statement said that the economy is in “mild deflation” and urged the central bank to do more to revive the economy.

In Tokyo trading Nikkei 225 Index fell 1% or 96.1 to 9,401.58, and the broader Topix Index 1.1% to 829.22.

Banks led the decliners in trading as investors worried that corporate profits will decline and small business defaults will hurt banks.

In the first section of the Tokyo Stock Exchange 8.1 billion shares worth 517 billion yen were traded and in the second section 193 million shares valued at 2.1 billion yen changed hands.

Of the Nikkei 225 index stocks, 36 rose, 181 dropped, and 8 were unchanged. UBE Industries led gainers in the index shares with a rise of 2.8% followed by Mitsui Mining & Smelting gaining 2.4%.

BoJ Should Actively Fight Deflation, Fujii

Japan’s Finance Minister Hirohisa Fujii said deflation falls within the jurisdiction of monetary policy, urging Bank of Japan to actively deal with the problem.

Last week, government said that the Japanese economy has slipped into recession and is flirting with depression. Fujii also noted that demand shortages cannot be addressed by fiscal steps alone.

“Deflation is a problem which should be addressed by the monetary (side). I support Deputy Prime Minister (Naoto) Kan''s stance that the government will exchange views and find a solution with the BOJ,” said Fujii.

Japan Flat-Panel TV Exports Rise 14.9% in October

Japan Electronics and Information Technology Industries Association said today the country’s domestic shipments of electronic appliances gained 14.9% to 259.6 billion yen in October from a year ago. The press release was first reported by Nikkei News.

Shipments were leveraged by strong demand for flat-panel televisions, which rose 65.5% to 1.16 million units.

Exports of Blu-ray Disc recorders surged 50% to 250,000 units.

JAL Shares Plunge Below 90 Yen

Japan Airlines shares dropped below the psychological mark of 90 yen as investors were rattled by the news that Mitsui & Co sold 11.73 million JAL commons shares in the first half ended September 30.

However Mitsui & Co. says it still holds 80 million preferred shares it purchased in the airliner. Investors fear that the stock may drop as low as 80 yen if restructuring plan falters.

Separately, Japan Today reported that the airline urged retirees yesterday to consider a 30% cut in pension benefits. Current employees were also urged to consider a 50% cut in pension benefits to conserve cash.

JAL president Haruka Nishimatsu said, “With our current state, it will be difficult to turn around the company without funds.”

The company needs approval from two-thirds of its employees to reform the pension system.

According to the report, government is considering mandatory reduction in pension schemes if approval cannot be obtained.

Gainers & Losers

UBE Industries led advancers in the Nikkei 225 index stocks with a rise of 2.8% followed by increases in Mitsui Mining & Smelting of 2.4%, in Sumitomo Electric Industries of 1.8%, in Sharp Corp. of 1.7%, in Sapporo Holdings of 1.5%.

Mitsui Chemicals led decliners in the Nikkei 225 index stocks with a drop of 10.1% followed by losses in Japan Airlines of 8.4% , in GS Yuasa Corp. of 7.6%, in Meidensha Corp of 7.3%, and Resona Holdings of 6%.

Japan Airlines fell as investors worried on news Mitsui & Co offloaded its share in the company.

Mitsubishi UFJ Financial Group Inc decreased 2.8% to 458 yen after it plans to raise as much as 1 trillion yen for the second time this year. Other banks declined on the news.

Chiba Bank slipped 4.9% to 539 yen and Mizuho Trust & Banking declined 3.9% to 321 yen.
Mizuho Financial Group declined 2.5% to 154 yen as investors worried that the banks weak capital ratio will force more share offering in the near future.

Shipping companies declined on the deflation worries. Mitsui OSK Lines Ltd declined 2.5% to 506 yen and Nippon Yusen KK dropped 2.4% to 289 yen.

Mori Seiki Co. Ltd, the machine tools maker declined 11.2% or 100 yen its daily limit to 785 yen after it plans to issue more shares to raise capital.