Japanese Stocks Jump Most in More Than 5 Years on Fed Rate Cut
By Kiyori Ueno and Patrick Rial
Sept. 19 (Bloomberg) -- Japanese stocks jumped the most in more than five years after the U.S. Federal Reserve cut its benchmark rate by half a percentage point, easing concern growth will slow in the world's largest economy.
Mitsubishi UFJ Financial Group Inc., Japan's biggest lender by assets, surged the most in almost two years. Toyota Motor Corp., poised to become the world's largest automaker this year, had its steepest climb since May 2004.
In the U.S., stock indexes rose the most since at least April 2003 after the first Fed rate cut in four years.
``It doesn't take an expert to explain what's going on today; the rate cut has cheered investors and they are scrambling to purchase stocks,'' said Junichi Misawa, who oversees $655 million at STB Asset Management Co. in Tokyo. ``You can find bargains in almost every industry. Banks are particularly cheap.''
The Nikkei 225 Stock Average added 579.74, or 3.7 percent, to 16,381.54. All but three of the 225 stocks included in the benchmark rose. The Topix advanced 56.63, or 3.8 percent, to 1,567.58. That was the biggest gain for both benchmarks since March 4, 2002. Shares that rose outnumbered those that fell 23 to one on the Tokyo Stock Exchange's first section, the broadest rally in 14 months.
The Bank of Japan voted eight to one to keep its overnight lending rate at 0.5 percent today. The move was expected by all of the economists surveyed by Bloomberg News.
Fed's Rate Cut
Mitsubishi UFJ jumped 60,000 yen, or 6.1 percent, to 1.05 million, the biggest rise since Oct. 11, 2005. Mizuho Financial Group Inc., Japan's second-largest bank by assets, added 327000 yen, or 4.5 percent, to 632,000. Sumitomo Mitsui Financial Group Inc., the No. 3, surged 45,000 yen, or 5.8 percent, to 821,000.
The Topix Banks Index tumbled 5.3 percent yesterday, the largest one-day drop since May 2004. It rebounded 4.7 percent today.
The Fed lowered its benchmark interest rate to 4.75 percent from 5.25 percent to protect the U.S. from sinking into a recession sparked by fallout from losses in the housing market. Most economists surveyed by Bloomberg predicted a quarter percentage-point reduction.
The Standard & Poor's 500 Index jumped 2.9 percent and the Dow Jones Industrial Average advanced 2.5 percent.
Exporters Gain
Exporters including Toyota advanced on speculation global and U.S. demand for their products will remain solid and after the yen weakened, boosting the value of overseas sales when converted back to local currency.
Toyota added 310 yen, or 4.9 percent, to 6,700, the biggest jump since May 12, 2004. Nintendo Co., which makes Wii game consoles, jumped 3,000 yen, or 5.4 percent, to 58,600 in Osaka. Canon Inc., the world's biggest digital-camera maker, advanced 210 yen, or 3.5 percent, to 6,300.
The yen recently traded at 115.80 to the dollar, down from 114.89 at the 3 p.m. close of stocks trading in Tokyo yesterday. The Japanese currency dropped to 161.92 against the euro from 159.16.
Toyota's annual operating profit, or sales minus the cost of goods sold and administrative expenses, gains about 35 billion yen ($302 million) for every 1 yen Japan's currency weakens against the dollar, and 6 billion yen for every 1 yen drop against the euro, according to Koji Endo, a senior analyst at Credit Suisse Group in Tokyo.
The Topix Mining Index, which tracks oil explorers such as Inpex Holdings Inc., jumped 7.7 percent, the best performer among the 33 industry groups in the broad measure and its biggest gain since April 3, 2006.
Oil-Related Stocks
Inpex, Japan's largest energy explorer, surged 100,000 yen, or 8.9 percent, to 1.22 million, the biggest advance since the stock was listed on April 3, 2006. Its smaller rival AOC Holdings Inc. advanced 74 yen, or 4.3 percent, to 1,812. Itochu Corp., a trading company which sells industrial fuel, climbed 83 yen, or 6.7 percent, to 1,328.
Crude oil for October delivery rose to as high as $82.37 a barrel in after-hours electronic trading on the New York Mercantile Exchange. Futures yesterday touched $82.38 late in the session, the highest intraday price since the contract was introduced in 1983. Prices are up 33 percent from a year ago.
Cosmo Oil Co., Japan's fourth-largest refiner, surged 34 yen, or 6.3 percent, to 578 after it said it will sell a 20.85 percent stake to Abu Dhabi's state-controlled International Petroleum Investment Co. for 89.2 billion yen. The Middle Eastern nation will become Cosmo's largest shareholder.
Aioi Jumps
Aioi Insurance Co., Japan's No. 4 publicly traded property and casualty insurer by revenue, soared 34 yen, or 5.9 percent, to 610. Sompo Japan Insurance Co., the nation's third-largest non-life insurer, jumped 67 yen, or 5.9 percent, to 1,208.
Ryuji Kakimoto, an analyst at Credit Suisse in Tokyo, raised the recommendation on shares of both companies to ``outperform'' from ``neutral'' in notes to clients dated yesterday, saying the shares had been unjustly sold on subprime- related concerns.
H.I.S. Co., Japan's largest discount travel agency, plunged 365 yen, or 14 percent, to 2,160. The company said operating profit for the nine months ended July 31 fell 8.1 percent to 2.45 billion yen as the weak yen discouraged overseas travel.
Nikkei futures expiring in December climbed 3.7 percent to 16,370 in Osaka and rose 3.4 percent to 16,365 in Singapore.
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