By Masaki Kondo and Toshiro Hasegawa
Oct. 29 (Bloomberg) -- Japan's stocks surged a second day as speculation the Bank of Japan will cut rates spurred the yen's steepest drop in three decades, boosting earnings prospects for makers of cars and electronics.
Honda Motor Co., which said the rising yen led to a plunge in quarterly profit, jumped 18 percent, the most in at least 34 years, while Toyota Motor Corp., now trading below book value, rose 10 percent. Panasonic Corp., the largest maker of consumer electronics, climbed 4.6 percent after second-quarter profit beat its estimate, while consumer lender Promise Co. rose the most in eight years after lifting its profit forecast by a quarter.
``As businesses report results, people have noticed most of them aren't in the red after all,'' said Naoyuki Torii, general manager of equities at Fukoku Mutual Life Insurance Co., which manages about $59 billion. ``Even blue-chip companies are trading below book value, which shows how cheap Japanese shares are.''
The Nikkei climbed 589.98, or 7.7 percent, to close at 8,211.90 in Tokyo, building on yesterday's 6.4 percent advance. The broader Topix index added 46.29, or 5.9 percent, to 830.32, with more than five stocks rising for each that slumped.
The Standard & Poor's 500 Index soared 11 percent yesterday in New York after a rally in Japan that lifted the Nikkei 225 Stock Average from a 26-year low.
Yesterday, the yen depreciated the most against the dollar since January 1974, while weakening against the euro the most since the European currency's debut in 1999. A stronger Japanese currency reduces the value of repatriated sales, and its gain had pushed export-dependent companies like Canon Inc. and Sony Corp. to cut annual earnings forecasts in the past week.
Rate Changes
The Bank of Japan may cut its benchmark rate by a quarter percentage point to 0.25 percent, Nikkei English News said, and the Federal Reserve will announce its decision on interest rates as early as today. Central banks are trying to stem a global market rout that has wiped out $13 trillion in share values this month, threatening to drag the world economy into a recession.
Industrial output will fall more than 2 percent this month and next, Japan's Trade Ministry said today, while the Finance Ministry cut its economic assessment on all the nation's 11 regions for the first time since 1998.
Honda, Japan's No. 2 carmaker, soared 18 percent to 2,440 yen, the most since at least 1974 and adding to yesterday's 14 percent surge. The carmaker said yesterday quarterly profit fell 41 percent as U.S. demand waned and the yen rose. Larger rival Toyota, which has fallen by a fifth this month, added 10 percent to 3,500 yen, while Nissan Motor Corp. advanced 11 percent to 471 yen, the most since Oct. 14.
`Synergistic Effects'
Panasonic, climbed 4.6 percent to 1,471 yen, after saying net income fell 16 percent to 55.5 billion yen, beating its 32 billion yen forecast implied by the company's first-half projection. Promise jumped 15 percent to 1,526 yen, the most since January 2000, after the consumer lender lifted its annual profit forecast by a quarter on lower bad loan costs.
Nintendo Co., maker of the Wii game machine and whose shares plunged 40 percent in the month through yesterday, jumped 12 percent to 27,600 yen in Osaka trading. Daikin Industries Ltd., an air-conditioner maker that counts Europe as it biggest source of profit, rose 17 percent to 2,050 yen after having declined by half this month. Canon climbed 6.9 percent to 2,730 yen.
``Expectations of the BOJ's rate cut, the weakening local currency and the rally in U.S. stocks will have synergistic effects,'' Hiroichi Nishi, an equities manager at Tokyo-based Nikko Cordial Securities Inc., said on Bloomberg TV. ``When the plunge is deep, the rebound will be big.''
Nikkei futures expiring in December added 6.7 percent to 8,250 in Osaka and gained 7.1 percent to 8,260 in Singapore.
To contact the reporters for this story: Masaki Kondo in Tokyo at mkondo3@bloomberg.net; Toshiro Hasegawa in Tokyo at thasegawa6@bloomberg.net.
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