Japan Stocks Rise a 3rd Day as Dollar Strengthens; Sony Gains

By Masaki Kondo

July 24 (Bloomberg) -- Japan's stocks rose a third day as the stronger dollar and a drop in oil prices sparked optimism Japanese companies' overseas sales will weather a global slowdown.

Sony Corp., maker of the PlayStation 3 game machine, surged the most in four weeks as the dollar rose to the highest in a month. Toyota Motor Corp. advanced after crude oil traded near a seven-week low, while oil explorer Inpex Holdings Inc. sank for a second day. Mitsubishi UFJ Financial Group Inc. led banks higher after U.S. lawmakers approved a rescue plan for embattled mortgage lenders Fannie Mae and Freddie Mac.

``Although the drop in oil will cause commodities-related stocks to fall, considering the overall impact on Japan's economy, the pros outweigh the cons,'' said Hiroshi Morikawa, a senior strategist at Tokyo-based MU Investments Co., which manages the equivalent of $14 billion.

The Nikkei 225 Stock Average climbed 172.51, or 1.3 percent, to 13,485.44 as of 1:28 p.m. break in Tokyo. The broader Topix index rose 19.65, or 1.5 percent, to 1,323.00. More than six stocks advanced for each that fell on the index.

Stocks shrugged off a report that exports fell for the first time in more than four years in June, as a 14 percent drop in crude since July 3 raised expectations global demand for Japanese goods will rebound. Sales to Asia cushioned a 1.7 percent drop in exports last month as demand from the U.S. and Europe declined, the Finance Ministry said today before markets opened.

Meanwhile, U.S. lawmakers reached a deal on legislation that authorizes Treasury Secretary Henry Paulson to bail out Fannie Mae and Freddie Mac, the biggest U.S. mortgage lenders. The deal sent the dollar higher and crude prices lower on speculation it will calm turmoil in financial markets.

Sony, Toyota

Sony, which gets a quarter of its sales from the U.S., added 2.5 percent to 4,490 yen, set for the sharpest jump since June 26. Honda Motor Co., Japan's second-largest carmaker, advanced 3 percent to 3,810 yen. Toyota, the world's biggest automaker by market value, jumped 4.1 percent to 5,070 yen, headed for the highest since June 27. The company yesterday said preliminary second-quarter sales increased about 2 percent on rising demand in China and other emerging markets.

The dollar traded as high as 107.98 yen today from 107.34 at the close of stock trading in Tokyo yesterday, the highest since June 26. A stronger dollar boosts the value of Japanese companies' repatriated overseas sales. A 1 yen change against the dollar alters Sony's annual operating profit by 4 billion yen ($37 million), according to the company.

Inpex, Orix

Crude oil extended its decline, falling 3.1 percent to $124.44 a barrel yesterday, the lowest close since June 4. Oil prices have risen 29 percent this year and hit a record close of $145.29 on July 3.

Inpex, Japan's largest oil and gas explorer, plunged 5.5 percent to 1,045,000 yen, set for its biggest two-day decline since March 18. Closest rival Japan Petroleum Exploration Co. dropped 3 percent to 6,390 yen.

Mitsubishi UFJ, Japan's largest publicly traded bank, added 1.3 percent to 1,023 yen, and Orix Corp., the nation's largest non-bank financial company, climbed 3.3 percent to 17,250 yen. Aiful Corp., Japan's biggest consumer finance company by assets, leapt 6.7 percent to 1,233 yen. A gauge tracking consumer lenders posted the biggest gain among 33 industry groups on the Topix.

Japan's three biggest lenders, including Mitsubishi UFJ, held a total of 4.7 trillion yen in debt securities issued by Fannie Mae, Freddie Mac and other U.S. government-backed mortgage financers as of March 31, according to the banks.

Mobile Carriers

KDDI Corp., the nation's second-largest mobile-phone operator, jumped 5.5 percent to 618,000 yen, headed for the biggest advance since August 2005. Market leader NTT DoCoMo Inc. climbed 3.5 percent to 163,900 yen. A measure representing telecommunications and Internet-related stocks accounted for almost a 10th of the Topix's gain.

``Buying defensive stocks is a meaningful move under these circumstances,'' said MU's Morikawa. ``The current rally may be short-lived given uncertainty in the global economy still lingers.''

Nikkei futures expiring in September added 1.1 percent to 13,490 in Osaka and gained 1.1 percent to 13,510 in Singapore.

To contact the reporter for this story: Masaki Kondo in Tokyo at mkondo3@bloomberg.net.