Nikkei Index Drops 2.1%; daVinci Plunges 19%

Darlington Musarurwa
19 Feb, 2010
New York City

Japan indexes fell more than 1.7% after the U.S. Fed raised rates for emergency lending and began to unwind measures taken during the financial crisis. Geo political risk was also a concern after North Korea was reported to declare a portion of its border as a firing zone. K.K. daVinci dropped 19%.

[R]5:00 AM New York, 7:00 PM - Japan market indexes fell more than 1.7% after the U.S. Fed raised rates for emergency lending and began to unwind measures taken during the financial crisis. Geo political risk was also a concern after North Korea was reported to declare a portion of its border as a firing zone. Real estate stocks declined.[/R]

Japanese market indexes fell in the last trading day of the week as the U.S. Federal Reserve raised its discount rate for the first time in three years. Stocks also declined after reports suggested that North Korea declared firing zone near its border with South Korea.

Real estate stocks decreased after k.k. daVinci plunged its daily limit of 1,000 yen or 19% after it write down its property asset values.

YTN television in a news report said that North Korea has declared firing zone the maritime border it shares with South Korea off its west coast.

The central bank governor Ben S. Bernanke had signalled on Feb 10 that the Fed will unwind various emergency measures and investors should expect steps soon.

The action thought expected surprised investors but fed funds rates, the reference rate for lending among banks and for consumer and business loans has still be left at the target range between zero and 0.25%.

In Tokyo trading Nikkei 225 Stock Average fell 2.1% or 212.11 to 10,123.58, and the broader Topix Index dropped 1.7% to 889.08.

In the first section of the Tokyo Stock Exchange 8.4 billion shares valued at 564 billion yen were traded and in the second section 103 million shares worth 1.3 billion yen changed hands.

Of the Nikkei 225 index stocks, 9 gained, 214 dropped, and 2 were unchanged. Taiheiyo Cement led gainers in the index shares with a rise of 3.6% followed by GS Yuasa Corp. jumping 2.4%.

U.S. Fed Reserve Hikes Discount Rate

U.S. Federal Reserve reported today that it has increased the discount rate by 25 basis points to 0.75% effective February 19, widening the spread between the federal funds and discount rate to 5%.

The discount rate is for emergency funds needed by banks. The central bank had increased the availability of the funds and maturing of loans to as much as 90 days at the peak of financial crisis in March 2008.

Minimum bid rate for Term Auction Facility, another emergency measure, was also increased by 25 basis points to 0.50%.

With this move the Fed is encouraging banks to rely on private sources of financing and use the Federal Reserve as a lender of last resort.

Department Store Sales Drop 5.7% in January

Japan’s Department Store Association said today department store sales declined 5.7% in January from a year ago, falling for the 23rd month in a row.

The Association said the pace of sales decline stayed at 5% for the second consecutive month as consumer anxiety was mitigated by the effects of stimulus measures such as the “eco-point” system and the eco-car tax reduction.

The second supplementary budget for fiscal 2009 also helped to arrest the decline.

JAL Plans to Cut 5% Monthly Wages

Japan Today reported Japan Airlines Corp is considering cutting 5% in monthly wages and forgo bonus payments for subsidiary employees as part of its restructuring process.

The wage cut is expected to affect 16,000 employees at Japan Airlines International Co. through suspension of wage increases and promotions.

JAL expects to implement the measures from April 1 after the plan was submitted to its proposals to its eight labour unions for consideration of the wage system for the upcoming business year through March 11.

Wage reductions are estimated to slash costs more than 30 billion yen.

Nikkei Movers

Shinsei Bank, Limited led the decliners in the Nikkei 225 Stock Average with a loss of 6.4% followed by losses in Kajima Corp of 6.0%, in Trend Micro Incorporated of 5.6%, in Toho Zinc Co., Ltd 4.8% and in JTEKT Corporation 4.4%.

Taiheiyo Cement Corporation led gainers in the Nikkei 225 Stock Average with a rise of 3.6% followed by gains in GS Yuasa Corporation 2.4%, in Mitsubishi Chemical Holdings Corp of 2.3% and in Tosoh Corporation 2.2%.

Other Movers

Honda Motor Co., Ltd slipped 1.1% to ¥3,095.00 after the carmaker aims to sell at least 632,200 cars in China this year, 10% more than last year, Reuters reported.

Japan Tobacco Inc. declined 1.9% to ¥322,000 after Health Minister Akira Nagatsuma commented to reporters that smoking in public places may be banned and the government will soon issue a directive on passive smoking this month.

Mitsui & Co the trading company dropped 3.1% to ¥1,352.

Mitsui Fudosan Co., Ltd the property developer dropped 4.3% to ¥1,461.00 after asset write down from k.k. daVinci. Mitsubishi Estate Co. decreased 4.3%.

Sony Corporation fell 1.1% to ¥3,095.00 after the sale of various kinds of electronic equipment said it will close its Alabama recording media plant by September as part of an effort to consolidate production amid tough competition.