Japan Stocks Rebound on Weaker Yen; West Japan Railway Slumps

By Masaki Kondo

Feb. 19 (Bloomberg) -- Japanese stocks rose, sending the Nikkei 225 Stock Average toward its first gain in four days, as the weaker yen lifted the earnings prospects for makers of cars and electronics.

Honda Motor Co., which gets more than half of its profit from North America, gained 2 percent as the Japanese currency traded near the weakest level this year. Funai Electric Co., which counts North America as its biggest market by sales, surged 12 percent after Credit Suisse Group boosted its share price estimate by 75 percent. West Japan Railway Co. slid 3.5 percent after UBS AG recommended selling the stock.

“With the yen depreciating, the headwind against Japanese exporter stocks will blow weaker today,” Juichi Wako, a strategist at Tokyo-based Nomura Securities Co., said in an interview with Bloomberg Television. “Trading has been stagnant lately, so we can’t expect a robust gain in the market.”

The Nikkei 225 Stock Average climbed 42.12, or 0.6 percent, to 7,576.56 as of 9:40 a.m. in Tokyo, set for its first advance this week. The broader Topix index rose 2.33, or 0.3 percent, to 751.59, with 15 of its 33 industry groups advancing.

The Topix has lost 13 percent so far this year, nearing the lowest since 1984, as the nation’s economy shrank at the fastest pace since the 1974 oil shock. Because of dwindling demand and the yen’s gain over the past year, the gauge’s members forecast an 86 percent tumble in net income for the year to March 31, according to Shinko Research Institute Co.

Automakers, Yen

Honda, Japan’s No. 2 carmaker, rose 2 percent to 2,295 yen, while bigger rival Toyota Motor Corp. added 2.3 percent to 3,130 yen. Canon Inc., which gets a third of its sales from the Americas, advanced 1.5 percent to 2,350 yen. Automakers contributed the most to the Topix’s advance.

The Japanese currency traded as weak as 93.85 against the dollar today from 92.39 at the close of stock trading in Tokyo yesterday. The yen sank to 93.96 late yesterday, the weakest level since Jan. 7. A 1 yen change against the dollar alters Canon’s annual operating profit by 9.1 billion yen ($97 million), the company said last month.

Funai, a maker of electronics under the Sylvania and Emerson brands, jumped 12 percent to 2,370 yen. Credit Suisse boosted its rating on the stock to “outperform” from “neutral” with a 12-month price estimate of 2,800 yen, saying demand from its main customer Wal-Mart Stores Inc. was rising. Goldman Sachs Group Inc. also raised the stock to ‘buy.”

West Japan Railway, the nation’s third-largest rail operator by value, dropped 3.5 percent to 335,000 yen. UBS reduced the stock’s rating to “sell” from “neutral,” saying the company is “vulnerable” to the recession.

More investors have become pessimistic about the earnings prospects for Japanese companies, Masatoshi Kikuchi, Tokyo-based chief equity strategist for Merrill Lynch & Co., wrote in a report yesterday. Fewer investors are overweighting Japanese shares, while more people plan to reduce their holdings of the nation’s equities in the next year, he wrote.

Nikkei futures expiring in March dipped 0.1 percent to 7,570 in Osaka and inched up 0.1 percent to 7,570 in Singapore.

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