Japanese Stocks Climb as Inflation, Credit-Market Concerns Ease

By Masaki Kondo and Patrick Rial

Aug. 25 (Bloomberg) -- Japanese shares rose for the first time in a week after crude oil dropped, relieving inflationary pressure, and as credit-market concerns eased amid speculation Lehman Brothers Holdings Inc. will receive an investment.

Bridgestone Corp., the world's largest tiremaker by sales, surged 4.1 percent after oil fell more than $6 a barrel and Federal Reserve Chairman Ben S. Bernanke said inflation should slow. Mitsubishi UFJ Financial Group Inc., Japan's largest publicly traded bank, jumped 4.8 percent after a report Korea Development Bank might invest in Lehman.

The Nikkei 225 Stock Average rose 212.62, or 1.7 percent, to 12,878.66 at the close of trading in Tokyo. The broader Topix index advanced 22.83, or 1.9 percent, to 1,239.25, the biggest gain since Aug. 6. Only two of the 33 industry groups on the Topix fell. Volume on the first section of the Tokyo Stock Exchange plunged to 1.31 billion shares, the lowest for a full day of trading since September 26, 2006.

``A decline in oil prices is no doubt good for Japanese companies' earnings as it reduces manufacturing costs,'' said Yoji Takeda, who helps manage the equivalent of $1.1 billion at RBC Investment (Asia) Ltd. in Hong Kong. ``This is positive in that inflation will recede and interest rates will fall worldwide except in the U.S. and Japan.''

The stronger dollar and the reopening of a pipeline through Georgia helped send crude oil for October delivery 5.4 percent lower to $114.59 in New York on Aug. 22, the biggest drop since December 2004. The contract traded at $114.60 today.

A recovery in the dollar and declines in commodity prices ``should lead inflation to moderate,'' Bernanke said on Aug. 22.

Banks Advance

Bridgestone gained 70 yen to 1,799, the biggest advance since Aug. 6, while Sumitomo Rubber Industries Inc., the third- biggest tiremaker, added 5.1 percent to 886 yen. Honda Motor Co., which gets more than half its profit from North America, surged 4.4 percent to 3,590 yen, and Toyota Motor Corp. rose 2.9 percent to 4,910 yen. Makers of rubber products posted the steepest jump among the Topix industry groups, followed by banks and auto manufacturers.

Mitsubishi UFJ added 4.8 yen to 831, the largest gain since May 30. Mizuho Financial Group Inc., Japan's second-biggest publicly traded bank, climbed 4.8 percent to 462,000 yen. Nomura Holdings Inc., the nation's largest brokerage, added 3 percent to 1,450 yen.

Lehman rallied 5 percent on Aug. 22 after Reuters reported KDB is considering buying a stake in the U.S. investment bank. Lehman's shares had earlier slumped on a report talks to sell a 50 percent stake had collapsed.

`Bullish on Paper'

Rengo Co., Japan's biggest maker of cardboard boxes, surged 4.5 percent to 726 yen, the highest since Aug. 6. Oji Paper Co., the nation's biggest user of high-sulfur fuel oil, climbed 2.1 percent to 547 yen. Kazuya Hisataka, a Tokyo-based analyst for UBS AG, raised his 12-month price estimates on Rengo and Oji by 14 percent and 5.2 percent respectively and reiterated his ``buy'' ratings on the stocks.

``We are now even more bullish on the paperboard/cardboard sector,'' Hisataka wrote in a report dated Aug. 22, citing price increases and easing raw material costs. Rengo will raise prices for its products by at least 13 percent from Oct. 1, the company said on July 1 on its Web site.

Daikin Industries Ltd., the biggest Japanese maker of air conditioners, jumped 2.1 percent to 3,850 yen after the Nikkei newspaper said air conditioner sales climbed 20 percent since June from the previous year, driven by hotter weather.

Marvel Tie-Up

Index Holdings rallied 16 percent to 13,000 yen, the sharpest climb since January, after the New York Times said the company will produce animation series for Japan's market based on superheroes created by Marvel Entertainment Inc.

Shares also advanced after the Nikkei newspaper reported on Aug. 23 that the Financial Services Agency plans to recommend a tax exemption on stock capital gains of up to 5 million yen for elderly investors.

``That kind of policy could help breath some life into the market as baby boomers start to funnel their retirement funds into the stock market,'' said Yasuhiro Miyata, a senior portfolio manager at DIAM Co. in Tokyo, which manages the equivalent of $109 billion.

Nikkei futures expiring in September gained 1.6 percent to 12,870 in Osaka and climbed 1.3 percent to 12,865 in Singapore.

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