Japan Stocks Rise as Inflation Concerns Ease; Mazda, Canon Gain

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 spending will rebound.

Mazda Motor Corp., a third owned by Ford Motor Co., led carmakers to their biggest jump in two weeks, while Bridgestone Corp., the world's biggest tiremaker, soared the most in four months after oil sank for a third day. Canon Inc., the world's biggest maker of digital cameras, jumped on speculation lower energy costs will boost consumer spending power.

``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 340.23, or 2.6 percent, to close at 13,254.89 in Tokyo, breaking a three-day slide. The broader Topix index added 29.56, or 2.4 percent, to 1,277.27. 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 and caused production, household spending and exports to fall in June.

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.

Mazda, Japan's fourth-largest automaker, surged 7.2 percent to 594 yen, the biggest jump since June 4, while Fuji Heavy Industries Ltd. soared 6.9 percent to 572 yen, breaking a four- day skid. Automakers as a group rose the most since July 24.

Tires, Games

Bridgestone surged a second day, rising 6.8 percent to 1,832 yen, the sharpest gain since April 2. Rival Sumitomo Rubber Industries Inc. jumped 6.3 percent to 873 yen.

The drop in oil gave a gauge of tiremakers its biggest jump since Jan. 25, making it the biggest winner among 33 Topix groups. About seven gallons of oil are needed to make a standard car tire, according to the Rubber Manufacturers Association.

Canon rose 5 percent to 5,090 yen. Sony Corp., maker of the PlayStation 3 game machine, added 5.7 percent to 4,290 yen, the biggest gain since May 15. Sony also rose 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 advance.

Freed From Fuel

``There are increasing expectations the decline in crude will free up consumers to spend more on other products rather than fuel,'' said Masaru Hamasaki, a senior strategist in Tokyo at Toyota Asset Management Co., which manages the equivalent of $3.3 billion.

Sanyo Electric Co., Japan's third-biggest solar-cell maker, jumped 10 percent to 228 yen, after having lost 16 percent in the previous four days. The company yesterday forecast its global market share in solar batteries will more than double by 2020.

NGK Insulators Ltd. which makes parts used in wind power, soared 8.3 percent to 1,540 yen, while GS Yuasa Corp., a maker of batteries for electric cars, gained 8.9 percent to 516 yen. NGK and GS Yuasa had fallen 20 percent and 14 percent respectively in the five days through yesterday.

Nikkei futures expiring in September added 2.4 percent to 13,230 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.