Japan Stocks Rally to 2-Week High on Bank Rates; Sanyo Soars

By Masaki Kondo
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Nov. 4 (Bloomberg) -- Japan stocks rose to a two-week high after a drop in interest rates charged between banks raised speculation lending may recover as credit markets ease.

Mizuho Financial Group Inc., a bank that last week more than halved its profit forecast, jumped 7.1 percent, while Orix Corp., the nation's biggest non-bank financial company, climbed 7 percent. Sanyo Electric Co. soared 34 percent on reports Panasonic Corp. will buy the company. Nissan Motor Co. sank 11 percent, the most since Oct. 16, after scrapping its dividend.

``The stability of financial markets has been restored somewhat,'' said Hideyuki Ookoshi, who helps oversee about $365 million at Chiba-Gin Asset Management Co. in Tokyo. ``Investors are keeping a keen eye on government efforts to shore up banks' capital, which is the key to the recovery of global economies.''

The Nikkei climbed 537.62, or 6.3 percent, to close at 9,114.60 in Tokyo, while the broader Topix index rose 43.58, or 5 percent, to 910.70. Both benchmarks climbed to the highest level since Oct. 21. Japan's markets were closed yesterday for a national holiday when MSCI's Asian stock index jumped 2.1 percent.

The total value of shares traded on the Tokyo Stock Exchange declined 18 percent today to the lowest level since Oct. 22 and 86 percent of the average for the past six months.

Japan's three-month interbank offered rate fixed in Tokyo, or Tibor, fell today by the most since December 1999, following a drop in the London interbank offered rate, or Libor, to the lowest since the failure of Lehman Brothers Holdings Inc. on Sept. 15. The Bank of Japan reduced benchmark interest rates last week to spur growth after similar cuts in the U.S. and China.

Bank Lending

The collapse of Lehman and takeovers of financial institutions including American International Group Inc. rattled confidence in the global banking system, driving Libor to a near 10-month high on Oct. 8 and causing credit market to seize up.

Mizuho, Japan's second-largest listed bank, climbed 7.1 percent to 248,400 yen, while market leader Mitsubishi UFJ Financial Group Inc. gained 4.9 percent to 627 yen. Orix added 7 percent to 10,550 yen, and Tokio Marine Holdings Inc., the nation's biggest casualty insurer, rose 10 percent to 3,240 yen.

``Lower Tibor should be good for bank lending, but we still need to heal the low confidence in the markets,'' said Tomohiko Katsu, deputy general manager of the capital markets division at Shinsei Bank Ltd. in Tokyo. The rate cut ``was a supportive move by the BOJ.''

Sanyo jumped 34 percent to 195 yen, the steepest leap since at least September 1974. Panasonic, the world's largest maker of consumer electronics, rose 6.8 percent to 1,614 yen. The companies will hold a press conference on Nov. 7 to announce details of Panasonic's plan to buy Sanyo, the Nikkei newspaper said, without saying where it obtained the information.

Paper Makers

A company official familiar with the negotiations earlier said Panasonic will seek to buy control of Sanyo, the world's leading maker of lithium ion batteries, from its biggest shareholders Goldman Sachs Group Inc., Sumitomo Mitsui Banking Corp. and Daiwa Securities SMBC Co.

Nippon Paper Group Inc. soared 16 percent, the most since its establishment in March 2001, to 301,000 yen after saying on Oct. 31 net income surged 14 percent in the first half, and as crude oil dropped by almost $4 a barrel yesterday. Oji Paper Co., the nation's biggest user of high-sulfur fuel oil, rose 9.1 percent to 407 yen, sending a gauge of papermakers to the biggest gain among 33 industry groups on the Topix.

Crude for December delivery dropped 5.8 percent to $63.91 a barrel yesterday, having fallen 57 percent from a record on July 11. Oil futures were little changed today.

Nissan Slump

Nissan, Japan's third-largest carmaker, tumbled 11 percent to 441 yen, making it the third-worst performer on the MSCI World Index. The company said on Oct. 31 that dividend payments it promised for the next three years will be reviewed, threatening its ranking as the No. 3 dividend-yield stock in the Nikkei.

Nikkei futures expiring in December added 7.7 percent to 9,100 in Osaka and gained 8.4 percent to 9,105 in Singapore.

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