Japan Stocks Rise as Inflation Concerns Ease; Fuji Heavy Gains

By Masaki Kondo

Aug. 6 (Bloomberg) -- Japan's stocks rose the most in two weeks as falling oil prices lifted expectations production costs will ease and consumer spending will rebound.

Fuji Heavy Industries Ltd., the maker of Subaru cars, led automakers to their biggest jump in two weeks, while tiremaker Bridgestone Corp. rose the most in six months after crude oil fell a third day. Game maker Konami Corp. surged after posting its biggest quarterly profit gain in two years.

``Investors were caught by fear crude would keep rising endlessly,'' said Kenji Sekiguchi, general manager of strategic research and investment at Mitsubishi UFJ Asset Management Co., which manages about $61 billion. ``If oil stays at current levels, it will no longer be among the uncertainties we are facing.''

The Nikkei 225 Stock Average climbed 342.38, or 2.7 percent, to 13,257.04 as of 1:50 p.m. in Tokyo, breaking a three-day slide. The broader Topix index added 28.97, or 2.3 percent, to 1,276.68. Both gauges rose the most since July 22.

Crude prices, which have risen 64 percent in the past 12 months and spurred the fastest inflation in a decade in Japan, lost 1.8 percent to $119.17 a barrel yesterday, the lowest since May 5. Rising costs and weakening demand have dented corporate profits, prompting Japanese companies to cut output, investment and hiring.

Yesterday, the Federal Reserve said it ``expects inflation to moderate'' from later this year and left the benchmark interest rate unchanged. The Fed's comments sent U.S. stocks to their biggest rally since April.

Fuji Heavy surged 7.1 percent to 573 yen, the biggest jump since June 11, while Isuzu Motors Ltd., Japan's largest maker of light-duty trucks, soared 6.9 percent to 421 yen, breaking a four-day losing streak. Automakers as a group were set for the biggest gain since July 24.

Tires, Games

Bridgestone surged a second day, rising 7.5 percent to 1,843 yen, set for the sharpest gain since Jan. 25. Rival Sumitomo Rubber Industries Inc. jumped 5.2 percent to 864 yen.

The drop in oil sent a gauge of tiremakers to the biggest gain among groups on the Topix. About seven gallons of oil are needed to make a standard car tire, according to the Rubber Manufacturers Association.

Canon Inc., the world's biggest digital-camera maker, rose 5.2 percent to 5,100 yen. Sony Corp., which gets a quarter of its sales in the Americas, added 5.4 percent to 4,280 yen, the biggest gain since May 15. Sony also gained after saying it will buy out Bertelsmann AG's stake in Sony BMG Music Entertainment to get full control of the recording company. Electronics makers contributed the most to the Topix's jump.

`Solid' Earnings

Konami climbed 5.5 percent to 3,630 yen, headed for the biggest advance since May 16. The company reported a 66 percent jump in first-quarter operating profit yesterday on sales of the latest installment in its ``Metal Gear Solid'' video game series. That's the biggest advance in quarterly operating profit since June 2006, according to data compiled by Bloomberg.

Sanyo Electric Co., Japan's third-biggest solar-cell maker, jumped 9.7 percent to 227 yen, the biggest gain since April 2. Sanyo yesterday forecast its global market share in solar batteries will more than double by 2020 as it increases output.

Other battery-related stocks surged. NGK Insulators Ltd. which makes parts used in wind power, soared 8.9 percent to 1,548 yen, while GS Yuasa Corp., a maker of batteries for electric cars, climbed 9.5 percent to 519 yen.

Mitsubishi UFJ Financial Group Inc., Japan's biggest listed bank, lost 2.7 percent to 890 yen and was the most actively traded stock by volume on the Tokyo exchange. Net income tumbled 66 percent to 51.2 billion yen ($473 million) in the first quarter on increased bad-loan costs and a decline in fee income, the bank said yesterday. That's less than half of what analysts had estimated.

Nikkei futures expiring in September added 2.6 percent to 13,250 in Osaka and gained 2.5 percent to 13,250 in Singapore.

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