Japan Stocks Advance as Financial Concerns Ease; NTT Declines

By Masaki Kondo

Jan. 29 (Bloomberg) -- Japanese stocks gained, driving the Nikkei 225 Stock Average to its longest winning streak in three weeks, on expectations central bank efforts to unlock credit markets will ease the global financial crisis.

Mitsubishi UFJ Financial Group Inc., Japan’s biggest listed bank, jumped 4.8 percent on the U.S. Federal Reserve’s plan to buy longer-term Treasury bonds. Sumitomo Mitsui Financial Group Inc. soared 13 percent even after bad-loan costs decimated third- quarter profit. Honda Motor Co., which gets more than half its profit in North America, jumped 3.9 percent after the yen fell against the dollar. Nippon Telegraph & Telephone Corp. dived 3.3 percent as investors fled domestic-oriented shares on speculation Japan’s recovery will trail that of other countries.

The Nikkei 225 gained ground for a third day, climbing 144.95, or 1.8 percent, to close at 8,251.24 in Tokyo, its longest winning streak since Jan. 7. The broader Topix index rose 14.14, or 1.8 percent, to 818.47.

“Buying long-term government bonds will prevent interest rates from rising and damaging demand and the economy,” said Kiyoshi Ishigane, a Tokyo-based senior strategist at Mitsubishi UFJ Asset Management Co., which oversees about $61 billion. “By doing what’s usually a no-no, the Fed is making it clear authorities will pull out all the stops to prop up the deteriorating economy.”

Stimulus Plans

The Nikkei lost a record 42 percent last year as writedowns and credit losses surpassed $1 trillion at global financial companies, and the gauge has lost another 6.9 percent in 2009. The U.S. House yesterday passed President Barack Obama’s $819 billion stimulus plan a day after Japan’s Parliament approved Prime Minister Taro Aso’s $53 billion economic package.

More than two-thirds of the Nikkei’s members trade at below market value, according to Bloomberg data. The dividend yield for Nikkei constituents is an estimated 2.5 percent, almost twice the return on 10-year Japanese government bonds and lower than the 3 percent dividend yield for the Standard & Poor’s 500 Index.

The Fed is ready to buy longer-term Treasury securities to encourage lending, the Federal Open Market Committee said after leaving its benchmark interest rate as low as zero. New Zealand’s central bank today cut its key interest rate to a record low and said there’s room to cut rates further.

Banks, Insurers

Mitsubishi UFJ jumped 4.8 percent to 527 yen, and Sumitomo Mitsui, Japan’s third biggest listed bank, gained 13 percent to 3,810 yen, despite its 99 percent plunge in third-quarter net income because of losses on stockholdings and non-performing loans. Tokio Marine Holdings Inc., the nation’s largest nonlife insurer, leapt 8.8 percent to 2,585 yen, the highest close in three weeks, and consumer lender Promise Co. climbed 7.4 percent to 1,736 yen.

Insurers, banks and consumer lenders were the biggest winners among 33 industry groups on the Topix.

The Fed’s announcement helped the dollar strengthen to as much as 90.66 yen today from 89.22 at the close of stock trading in Tokyo yesterday. A weaker yen raises the value of repatriated sales for Japanese companies.

Honda, Japan’s No. 2 automaker, leapt 3.9 percent to 2,280 yen, and Toyota Motor Corp., the biggest automaker globally, added 2.4 percent to 3,050 yen. Sony Corp. rose 4 percent to 1,909 yen, while Canon Inc., the world’s biggest digital-camera maker, climbed 1.9 percent to 2,640 yen even after forecasting profit will fall to a decade low this year.

The yen appreciated to as much as 89.67 against the dollar in the afternoon, paring gains by car and electronics stocks.

‘Too Little’

Nippon Telegraph & Telephone, Japan’s biggest provider of fiber-optic networks, lost 3.3 percent to 4,340 yen, sending a gauge of telecommunication companies to the biggest drop among Topix groups. Closest rival KDDI Corp. sank 1.9 percent to 564,000 yen after Deutsche Bank AG lowered its rating to “hold” from “buy,” saying demand for fiber-optic network services will recede as the economy worsens.

“Japan’s stimulus plan is too little and too late,” said Mitsubishi UFJ’s Ishigane. “The Japanese government isn’t taking the dramatic steps that other countries are to bolster the economy, so it’s not surprising investors are shifting to exporters from domestic-oriented shares.”

Japan’s Trade Ministry today said retail sales fell in December by the most in almost four years as households reduced spending and became more concerned about job security.

Nikkei futures expiring in March gained 1.1 percent to 8,200 in Osaka and rose 1.2 percent to 8,215 in Singapore.

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