Japan Stocks Rise as Drop in Oil Eases Production Cost Concern

By Masaki Kondo

July 23 (Bloomberg) -- Japan's stocks rose for a second day as crude oil sank to a six-week low, easing concern energy costs will dent profits and consumer demand for Japanese-made goods.

Honda Motor Co., Japan's second-largest carmaker, headed for a one-month high, while game-machine producer Nintendo Co. extended yesterday's gain. Komatsu Ltd., the world's second- biggest maker of earthmoving equipment, surged to the highest in a month after bigger rival Caterpillar Inc. reported earnings that beat analysts' estimates.

The Nikkei 225 Stock Average climbed 135.84, or 1 percent, to 13,320.80 as of 9:34 a.m. in Tokyo. The broader Topix index advanced 17.75, or 1.4 percent, to 1,305.49. More than four stocks rose for each that fell.

``Companies that benefit from a decline in oil prices are likely to be bought today,'' Hiroichi Nishi, an equities manager at Nikko Cordial Securities Inc. in Tokyo, said in an interview with Bloomberg Television.

Crude for August delivery fell 2.4 percent to $127.95 a barrel yesterday, the lowest since June 5, on forecasts a tropical storm in the Gulf of Mexico will miss oil fields and as the stronger dollar reduced the appeal of commodities.

The yen depreciated to as much as 107.45 in New York, the weakest since July 9, from 106.51 at the close of stock trading in Tokyo yesterday. A weaker yen boosts the value of Japanese companies' overseas sales when converted into local currency.

Honda, which gets more than half of its profit from North America, jumped 3.1 percent to 3,710 yen, set for the highest since June 26, while Nintendo gained 1.5 percent to 56,100 yen in Osaka trading. Inpex Holdings Inc., Japan's largest oil and gas explorer, tumbled 3.5 percent to 1,115,000 yen.

Komatsu, Asahi

Suzuki Motor Corp., Japan's second-largest minicar maker, surged 3.3 percent to 2,535 yen after the Nikkei newspaper said the company may announce a record profit for the first quarter on sales in emerging countries.

Komatsu climbed 2.4 percent to 2,955 yen, set for the highest since June 30. Caterpillar's second-quarter profit jumped by a third on demand from China and the Middle East, it said yesterday, exceeding analysts' estimates by 13 percent. Komatsu, scheduled to report first-quarter results on July 29, recorded its fastest sales growth from China, the Middle East and Africa last fiscal year.

Asahi Breweries Ltd., Japan's biggest brewer, climbed 4.4 percent to 1,976 yen, set for the sharpest jump since March 18. First-half profit beat the company's target by 64 percent because of ``streamlining'' of advertising and fixed costs, Asahi said yesterday in a preliminary earnings report.

Developers

Mitsubishi Estate Co., Japan's second-largest developer, soared 4.6 percent to 2,510 yen, while larger rival Mitsui Fudosan Co. rose 3.9 percent to 2,425 yen. JPMorgan Chase & Co. initiated coverage of the companies with ``overweight'' ratings. Real-estate companies were the biggest winners among 33 industry groups on the Topix.

Nikkei futures expiring in September advanced 1 percent to 13,330 in Osaka and gained 1 percent to 13,325 in Singapore.

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