Japan’s Nikkei Rises in Longest Streak Since May on Car Bailout

By Patrick Rial

Dec. 11 (Bloomberg) -- Japan stocks rose, sending the Nikkei 225 Stock Average to its longest advance since May, on expectations a bailout of U.S. carmakers passed by the House of Representatives will alleviate a global economic recession.

Honda Motor Corp., which gets half its sales in North America, extended this week’s gains to 33 percent. Sumitomo Mitsui Financial Group Inc. surged 9.6 percent on reports it will raise more capital than originally forecast as bank lending in Japan surged. Mitsubishi Corp., Japan’s biggest trading house, jumped 8.6 percent as speculation OPEC will cut production sent oil prices higher for a second day.

The Nikkei 225 added 60.31, or 0.7 percent, to close at 8,720.55 on the Tokyo Stock Exchange, reversing a 1.6 percent slide and stretching gains to a fourth day, the longest stretch since May 15. The Topix index gained 14.70, or 1.8 percent, to 849.25. Trading volume on the main board of the exchange increased to the highest in three weeks.

“We are now witnessing a market that wants to rise,” said Kiyoshi Ishigane, a Tokyo-based senior strategist at Mitsubishi UFJ Asset Management Co., which oversees about $61 billion. “There remains some concern about the passage of a bailout, but the good news is the frame of Republicans’ debate has gradually changed from outright resistance to opposition to certain details.”

The Nikkei has tumbled 43 percent in 2008, set for its worst year on record, as Japan, the U.S. and Europe fell into the first simultaneous recession in the post-World War II era. Auto sales in the U.S., the world’s largest auto market, fell to the lowest annual rate in 26 years last month.

Party Opposition

The House approved a $14 billion loan package intended to prevent a collapse of American automakers that would threaten millions of U.S. jobs. The vote sends the measure to the Senate, where Republican party opposition could delay or kill the legislation.

Honda soared 7.9 percent to 2,195 yen. Larger rival Toyota Motor Corp. reversed an early drop on speculation it will cut production and won’t be able to pay its planned dividend, rising 4.8 percent to 3,070 yen. Denso Corp., the nation’s largest auto- parts maker, gained 6.2 percent to 1,627 yen.

“The direction of the auto bailout has become harder to read,” Juichi Wako, a Tokyo-based strategist at Nomura Securities Co., said in an interview with Bloomberg Television. “This problem will continue to determine the bearing of the stock market.”

Toyota Dividend

Toyota shares earlier dropped as much as 2.2 percent as the carmaker may cut auto production by 1 million units, Japan’s national broadcaster NHK said. It may also have to cut its dividend, as repeating last year’s payout would require more than four times its forecast for second-half profit, based on Bloomberg calculations.

Sumitomo Mitsui rose 9.6 percent to 342,000 yen. The lender will raise 700 billion yen in new capital through preferred share sales, up from a previous plan to boost capital by 400 billion yen, a person familiar with the situation said. The Nikkei newspaper said the funds are being raised to meet increasing loan demand from companies locked out of credit markets. Market leader Mitsubishi UFJ Financial Group Inc. added 6.8 percent to 500 yen.

Lending by Japanese banks rose 3.6 percent in November from a year earlier, the Bank of Japan said last week. That was the fastest pace of growth since records began in 1992.

Orix Corp., Japan’s largest non-bank financial company, soared for a second day, rising 9.9 percent to 5,200 yen. Orix received 100 billion yen in new bank loans and 20 billion yen in asset financing on Dec. 9. Concerns about the company’s ability to roll over debt sent the shares down 78 percent this year prior to the announcement.

Rebound ‘Due’

“Non-bank shares have been falling for the longest time and kept dropping even when the Nikkei 225 bottomed out in October,” said Mitsubishi UFJ’s Ishigane. “The shares were due for a rebound.”

Mitsubishi Corp., Japan’s largest trading company, and which generates more than half of its profit from commodities dealing, rose 8.6 percent to 1,249 yen. Kao Corp., which uses petrochemicals in its beauty products, declined 1.9 percent to 2,660 yen.

Energy Minister Sergei Shmatko said Russia will announce proposals for reducing production by Dec. 17, when the Organization of Petroleum Exporting Countries meets, Interfax said. The group, source of more than 40 percent of the world’s oil, may trim output by as much as 2.5 million barrels a day next week, billionaire hedge-fund manager Boone Pickens said Dec. 9.

OPEC Cuts

Crude oil, which has fallen more than $100 from its record in July, gained 3.4 percent to $43.52 a barrel in New York yesterday, and the contract rose as much as 2.2 percent today.

“In one way or another, efforts to boost the price of oil are going to work - OPEC’s production cuts as well as the general market turnaround will help prices rebound,” said Mitsubishi UFJ’s Ishigane.

Elpida Memory Inc., Japan’s largest memory chipmaker, lost 8.9 percent to 420 yen, the 20th-consecutive day the shares finished below the minimum conversion price of 509 yen for convertible bonds issued to Nomura Holdings Inc. That allows the brokerage to require Elpida to buy back the 50 billion yen in bonds at par value.

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