Japanese stocks jumped, sending the Nikkei 225 Stock Average to a near four-month high, as forecasts from Fujitsu Ltd. and Canon Inc. lifted optimism corporate earnings will recover in 2009.
Fujitsu, Japan's biggest computer-services provider, climbed 18 percent after predicting a return to profit. Camera maker Canon rose 6.1 percent after lifting its earnings target on the weaker yen and cost cuts. Itochu Corp. soared 9.9 percent after manufacturing in China expanded and Nikko Citigroup Ltd. said the trading company's profit drop will be smaller than peers. Chemical maker Showa Denko K.K. tumbled 7.4 percent as its loss forecast prompted analyst downgrades.
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The Nikkei 225 Stock Average advanced 149.11, or 1.7 percent, to close at 8,977.37 in Tokyo, the highest since Jan. 7. The broader Topix index rose 9.06, or 1.1 percent, to 846.85. The Nikkei added 3.1 percent in the past five days, snapping a two-week decline, while the Topix increased 2 percent.
"The electronics sector has managed to reduce inventory faster than other industries because their products were relatively inexpensive and price cuts could easily spur demand," Hiroshi Morikawa, a senior strategist at MU Investments Co. in Tokyo, which manages the equivalent of $14 billion. "Material makers need more time to finish the process and increase production."
The Nikkei has risen 1.3 percent on the year after losing a record 42 percent in 2008, on signs government and central bank measures to tackle the global recession are taking effect. Forty percent of Japanese businesses that have reported fiscal 2008 results expect pretax profit will rise this year, according to Shinko Research Institute Co.
Weakening Currency
Fujitsu surged 18 percent to 496 yen, the steepest jump since at least September 1974, the limit of Bloomberg pricing data. The Tokyo-based company said yesterday it expects to return to profit after selling its money-losing hard-disk-drive business to Toshiba Corp. and outsourcing some chip production.
Canon, the world's top camera maker, climbed 6.1 percent to 3,130 yen after lifting its annual net income target by 12 percent, citing the weaker yen and cost cuts. In January, Canon estimated the yen would average at 90 against the dollar and 120 versus the euro this year. The Japanese currency depreciated against the dollar to as much as 99.16 today, the weakest since April 20.
Showa Denko dived 7.4 percent to 137 yen, making it the biggest loser on the MSCI World Index. The company yesterday forecast a net loss for this year on weaker demand from automakers. Nikko Citigroup reduced its recommendation on the stock to "hold" from "buy," while Barclays Capital cut its rating to "equalweight" from "overweight."
Deflation Chill
Softbank Corp., the nation's No. 3 mobile-phone carrier, jumped 11 percent to 1,717 yen after doubling its dividend and saying it will eliminate its net interest-bearing debt by March 2015. It was the most actively traded stock by value in Tokyo.
As of March 31, Softbank had debt equivalent to 62 percent of total assets, according to Bloomberg data. That compares with 9.9 percent for market leader NTT DoCoMo Inc.
Consumer prices excluding fresh food fell 0.1 percent in March from a year earlier, the first drop since September 2007, Japan's statistics bureau said today. The jobless rate soared to a four-year high of 4.8 percent, a separate report showed.
"Deflation reduces companies' revenue and increases the actual value of their interest-bearing debt," said MU Investments' Morikawa. "As deflation is creeping back into Japan's economy, highly leveraged businesses will start feeling the chill of it."
Trading Houses
Itochu soared 9.9 percent to 578 yen, even after predicting its full-year net income will fall by a fifth this fiscal year. Itochu's profit decline in fiscal 2009 "is likely to be the smallest among the major trading companies," Toshiyuki Johno, an analyst at Nikko Citigroup, wrote in a report yesterday. Its undervalued stock will draw attention, Johno said.
Mitsubishi Corp., the nation's biggest trading house, leapt 6 percent to 1,600 yen, while closest rival Mitsui & Co. added 6.5 percent to 1,105 yen. The two companies get more than half their profit from commodities, and trading houses were the biggest winners among 33 industry groups on the Topix.
"I'm looking at the trading houses which are still cheap on earnings and book measures," said Kazuyuki Terao, who oversees about $1.3 billion as chief investment officer of RCM Japan Ltd. "They're also benefiting from public spending in China, which will drive commodities prices higher."
'Rapid' Recovery
Fanuc Ltd., Japan's biggest maker of industrial robots, added 5.1 percent to 7,430 yen. Demand from Chinese machinery makers "rapidly" recovered in March and April and the country's stimulus measures are taking effect, Nomura Holdings Inc. analyst Katsushi Saito wrote in a note yesterday, citing a briefing held by Fanuc.
China's Purchasing Manager's Index rose to a seasonally adjusted 53.5 this month from 52.4 in March, the Federation of Logistics and Purchasing said today. That exceeded the 50 threshold for a second month that divides between expansion and contraction. The country was Japan's biggest export market in March, according to a Finance Ministry report.
Nikkei futures expiring in June climbed 1.9 percent to 9,030 in Osaka and jumped 2 percent to 9,040 in Singapore. Enditem
