Yen Falls on Kan Comments; SMFG to Raise $8.7 B

Darlington Musarurwa
07 Jan, 2010
New York City

Finance Minister Naoto Kan in a departure from his predecessor signaled that the government will prefer weaker yen and is prepared to stem the rising yen. The yen fell 1.1% but is still 18% higher than a year ago. Tokyo office vacancy rises to 8.1% in December. Sumitomo Mitsui to raise $8.7 billion.

[R]5:00 AM New York, 7:00 PM Tokyo – Finance Minister Naoto Kan in a departure from his predecessor signaled that the government will prefer weaker yen and is prepared to stem the rising yen. The yen fell 1.1% but is still 18% higher than a year ago. Tokyo office vacancy rises to 8.1% in December. Sumitomo Mitsui plans to raise $8.7 billion.[/R]

The benchmark stock index fell in a directionless market led by Japan Airlines and comments from finance minister Kan suggested that weaker yen will be better for the economy. In a clear departure from his predecessor on the first press conference and signaled that the government is ready to stem the rising yen.

Economists worry that a rise in Japanese yen will weaken the economic recovery which appears to be protracted and uneven. Japan relies on exports growth for most of its economic expansion as the government debt surges to twice the size of its economy.

The yen declined 1.1% to 93.26 and fallen nearly 9% from its high in November but is still 18% higher from a year ago.

Japan will use 700 billion yen in public funds to bailout the carrier. The carrier is likely to take 1.13 trillion yen or $12 billion charge in the current fiscal year and seek bankruptcy protection, according to Nikkei News.

Profit taking also dampened market sentiment.

In Tokyo trading Nikkei 225 Stock Average fell 0.5% or 49.79 to 10,681.66, and the broader Topix Index gained 0.72 to 931.85.

In the first section of the Tokyo Stock Exchange 23.3 billion shares valued at 1.5 trillion yen were traded and in the second section 413 million shares worth 3.8 billion yen changed hands.

Of the Nikkei 225 index stocks, 113 rose, 96 fell, and 16 were unchanged. Credit Saison led gainers in the index shares with a rise of 7.1% followed by Alps Electric Co. of 6.1%.

Tokyo Office Vacancy Rate Rise to 8.09% in December

Nikkei News reported that Miki Shoji said today the country’s office vacancy rate in central Tokyo rose 0.1% to 8.09% month-on-month in December, gaining 8% for the first time in five years.

The average asking rent fell 1.7% from November to 18,978 yen per 3.3 square meters and dropped 14.46% on a year-on-year basis.

Office vacancy rate in Osaka''s business district climbed 0.25 point from November to 10.34%, and the rate in Nagoya''s business district advanced 0.24 point to 12.58%.

Miki Shoji expects newly constructed office space in central Tokyo to drop 20% in 2010.

SMFG to Raise 888.9 billion Yen

Sumitomo Mitsui Financial Group reported yesterday it plans to raise 888.97 billion yen by offering new shares after raising $9 billion in June.

However, the bank said the amount to be raised with depend on market conditions.

The lender will issue 340 million common shares, with 180 million or 36% of its outstanding stock, reserved for overseas investors and will set the offering price between January 20 and 22.

The bank further noted that U.S. investment bank Goldman Sachs Group Inc has agreed to convert 100 billion yen of SMFG preferred shares into common stock within a year, which will also be sold as soon as possible.

In December the Basel Committee urged financial institutions to strengthen their core tier 1 capital ratio and at the time Japanese regulators hinted that it will take a decade before Japanese banks will meet revised capital guidelines.

JAL Bailout with 700 Billion Yen

Japan Today reported a government backed corporate turnaround body The Enterprise Turnaround Initiative Corp. of Japan is making financial arrangements to use 700 billion yen in public funds for loans to rehabilitate Japan Airlines.

The body plans to create a credit line of 400 billion yen and invest 3000 billion yen in the carrier.

Nikkei Movers

Japan Airlines Corporation led the decliners in the Nikkei 225 Stock Average with a loss of 7.1% followed by losses in The Yokohama Rubber Company, Limited of 3.9%, in Terumo Corp of 2.7%, in Canon Inc 2.4% and in Bridgestone Corp 2.4%.

Credit Saison Co., Ltd led gainers in the Nikkei 225 Stock Average with a rise of 7.1% followed by gains in Alps Electric Co Ltd 6.1%, in The Sumitomo Trust and Banking Company, Limited of 5.9% and in Nippon Yusen Kabushiki Kaisha of 5.8%.

Other Movers

Japan Airlines Corporation fell 9.5% to ¥76.00 on the worries that the restructuring may take a bankruptcy filing. Separately, Nippon Yusen KK said it will delay the integration of its air cargo operation with the carrier.

Kirin Holdings Company, Limited the manufacture of alcohol beverages and soft drinks rose 0.7% to ¥1,510.00.

Sapporo Holdings Ltd climbed 0.5% to ¥530.00 after the brewer’s chief executive said Takao Murakami that the company will focus in North America and Southeast Asia, where returns on investment will be greater than in China.

Seven & I Holdings Co., Ltd fell 0.1% to ¥1,985.00 after the convenience-store operator reported nine-month profit dropped 22% as shoppers reined in spending amid a prolonged downturn. But, the retailer left its outlook for the year unchanged.

Sumitomo Mitsui Financial Group, Inc added 4.2% to ¥2,920.00 after the financial company plans to raise up to $8.7 billion by issuing new shares to meet stricter capital requirements and potential acquisitions in Asia.