Japan Production Index Rises; BoJ Lifts Outlook

Darlington Musarurwa
18 Jan, 2010
New York City

Bank of Japan raises assessments in four of the nine regions. Japan industrial production increases 2.2% in November. Finance minister Kan pledges to fight deflation. Japan Airlines Corp is negotiating with Delta and American Airlines to secure a better deal as it prepares its restructuring filing.

[R]5:00 AM New York, 7:00 PM Tokyo - Bank of Japan raises assessments in four of the nine regions. Japan industrial production increases 2.2% in November. Finance minister Kan pledges to fight deflation. Japan Airlines Corp is negotiating with Delta and American Airlines to secure a better deal as it prepares its restructuring filing this week.[/R]

The benchmark indexes in Tokyo dropped despite a rise industrial production in November and the Bank of Japan regional economic report indicating economic assessments were raised in four of the country’s nine regions.

Investors locked in gains on concern that the U.S. consumer and housing market may be weaker than expected after JPMorgan Chase increased loan loss provision in its latest quarterly results.

Prime Minster Hatoyama government is preparing to present its 7.2 trillion yen additional budget to Diet but the evolving fund-raising scandal involving Ichiro Ozawa, a senior official in the Democratic Party may hurt the government.

Prime minister is also seeking an early approval for next year’s budget of 92.3 trillion yen in the Diet session that opened today.

In Tokyo trading Nikkei 225 Stock Average fell 1.2% or 127.02 to 10,855.08, and the broader Topix Index decreased 1.2% or 11.83 to 954.57.

In the first section of the Tokyo Stock Exchange 11.8 billion shares valued at 658 billion yen were traded and in the second section 252 million shares worth 1.7 billion yen changed hands.

Of the Nikkei 225 index stocks, 26 gained, 192 fell, and 7 were unchanged. Nitto Boseki Co. led gainers in the index shares with a rise of 16.6% followed by Takashimaya gaining 5%.

BoJ Raises Assessments in Four of the Nine Regions

Bank of Japan reported today in its regional economic report that while five regions- Hokkaido, Tohoku, Hokuriku, Chugoku and Chikoku- maintained their assessments, four regions said there was an upward trend.

The four regions include Kanto-Koshinetsu, Tokai, Kinki, and Kyushu-Okinawa.

Private consumption remained weak in seven of the nine regions and only rose in Tokai and Chugoku.

Sales at large retail stores such as department stores continued in all regions, while tourism fell in four regions- Hokkaido, Tohoku, Kanto-Koshinetsu, and Kyushu-Okinawa.

The report notes that business fixed investment continued to decline substantially or remained at a low level in all regions as a result of deterioration in corporate profits.

Production continued to increase in all regions “although there were regional differences in the pace and extent of the recovery.”

However, all regions reported that the employment situation continues to be severe, with the ratio of job offers to all applicants remaining at a low level. In addition, household income continues to decline in all regions on reduction in winter bonus payments.

Industrial Production Jumps 2.2%

Ministry of Industry, Trade and Economy reported that industrial production index soared 2.2% to 88 in November from the previous month, but dropped 4.2% to 90.4 from the same period a year ago.

Shipments rose 0.9% to 89.6 from a month ago, while inventory gained 0.4% to 93.7 in the review period. The plant utilisation index for manufacturers also increased 3.2% to 83.1 in the review period.

Kan Pledges to Fight Deflation

Nikkei News reported today that Japan’s finance minister Naoto Kan said in a fiscal-policy speech on the first day of the regular 150-day parliamentary session there is need for the legislature to quickly pass government’s spending plans to forestall the deflationary spiral.

Prime Minister Yukio Hatoyama''s Cabinet endorsed 7.2 trillion yen additional budget for measures to support the economy last month.

Nikkei Movers

Japan Airlines Corporation led the decliners in the Nikkei 225 Stock Average with a loss of 25.0% followed by losses in Unitika of 5.1%, in Shinsei Bank, Limited of 4.6%, in Mitsubishi Motors Corp 3.4% and in Denki Kagaku Kogyo Kabushiki Kaisha 3.4%.

Nitto Boseki Co Ltd led gainers in the Nikkei 225 Stock Average with a rise of 16.5% followed by gains in Takashimaya Company, Limited 4.9%, in Chiyoda Corporation of 4.8% and in Tokai Carbon Co Ltd of 4.1%.

Other Movers

Fanuc Ltd the robot maker slipped 2.0% to ¥8,920.00.

Isetan Mitsukoshi Holdings Ltd the department store chain rose 0.2% to ¥896.

Japan Airlines Corp declined plunged 29% to ¥5 as it prepares its restricting filing with regulators this week.

Media reports suggests that Delta Air in its revised offer has offered to pay for $300 million to switch to SkyTeam alliance but will not invest in the carrier. Earlier Delta also said that its alliance will bring in 3.2 million passengers to JAL compared to 400,000 seats sold by JAL’s current OneWorld partner American.

American Air spokesperson Mary Frances Fagan said that the airline is looking forward to provide its proposal to regulators and guarantee $300 million in revenues in the next three years.

KDDI Corporation, the telecommunications company dropped 2.1% to ¥537,000.

Mitsubishi UFJ Financial Group, Inc decreased 1.5% to ¥498 and the largest trading company Mitsubishi Corporation fell 2.8% to ¥2,453.00.

Nissan Motor Co Ltd declined 2.6% to ¥780.00.

Orix Corporation fell 2.9% to ¥7,010.00 after the non-bank financial company announced that it has fully acquired Orix Securities Corp.

Sumitomo Corporation fell 1.6% to ¥1,088.00.