Japan Stocks Climb After Fed Rate Cut; Honda Slumps

By Patrick Rial

Dec. 17 (Bloomberg) -- Japanstocks rose after the Federal Reserve slashed interest rates to a record low and signaled it will continue to buy assets to bolster the world’s largest economy. Gains were limited as the dollar slumped.

Sumitomo Mitsui Financial Group Inc., Japan’s second-largest bank by market value, surged 4.7 percent. Mitsubishi Estate Co., the nation’s No. 1 developer by market value, gained 8 percent as traders increased bets the Bank of Japan will also lower rates, easing access to funding. Honda Motor Co. fell 5.4 percent as the yen traded near a 13-year high versus the dollar and a newspaper said Japan’s second-biggest carmaker will cut its profit forecast.

“In psychological terms I think the Fed’s move will help the market,” said Yuuki Sakurai, general manager of investment planning in Tokyo at Fukoku Mutual Life Insurance Co., which manages $54 billion in assets. “It provides some breathing room for the troubled economy, but it’s not the kind of move that will reenergize the system.”

The Nikkei 225 Stock Average climbed 72.44, or 0.9 percent, to 8,640.46 as of 9:51 a.m. in Tokyo. The broader Topix index gained 1 percent to 836.56. That compared with a 5.1 percent rally by the Standard & Poor’s 500 Index yesterday, the steepest advance in four weeks.

The Fed cut its target rate for overnight loans between banks to a range of zero to 0.25 percent, a record low. The central bank also said it will “employ all available tools to promote the resumption of sustainable economic growth and to preserve price stability.”

BOJ Rates

Sumitomo Mitsui rose 4.7 percent to 355,000 yen. Nomura Holdings, Japan’s largest brokerage, gained 1.1 percent to 648 yen. Mizuho Financial Group Inc., the country’s third-biggest bank by market value, rose 3.7 percent to 238,600 yen.

Additionally, Goldman Sachs Group Inc., the investment house that converted into a commercial bank, reported a fourth-quarter loss of $2.12 billion that was less than some analysts had estimated, helping financial shares rally in the U.S.

Mitsubishi Estate gained 8 percent to 1,422 yen. Tokyu Land Corp., a developer with property concentrated in western Tokyo, soared 11 percent to 368 yen.

Investors saw a 40 percent chance the Bank of Japan will reduce its benchmark interest rate from 0.3 percent at this week’s meeting, according to calculations made by JPMorgan Chase & Co. based on interest-rate swaps trading. Bankruptcies in Japan’s real estate sector have surged this year as housing demand slumped while banks reined in lending.

Honda Forecast

Honda, which gets more than half its sales in North America, lost 5.4 percent to 1,866 yen. Its operating profit will total about 300 billion yen ($3.31 billion) for the year ending March 31, 200 billion yen less than its October forecast, the Nikkei newspaper said. Honda said it will hold a press conference at 3 p.m. today.

Bridgestone Corp., the world’s largest tiremaker by sales, declined 3.7 percent, while Isuzu Motors Ltd., Japan’s third- biggest maker of commercial vehicles, fell 4.3 percent.

Exporters were also hurt as the yen climbed to as high as 88.64 against the dollar after the Fed lowered interest rates, reducing the value of overseas sales. The yen reached a 13-year high of 88.53 versus the dollar last week.

To contact the reporters for this story: Patrick Rial in Tokyo at prial@bloomberg.net.