Japan Bank Stocks Advance on BOJ Measures; Nintendo Slumps

By Patrick Rial

March 18 (Bloomberg) -- Japan’s bank stocks rose on optimism central bank measures will avert a deepening of the recession, while game makers slumped on Deutsche Bank AG’s “sell” rating on Nintendo Co.

Resona Holdings Inc., the nation’s No. 4 listed bank, jumped 4.6 percent after the Bank of Japan said it will increase its government debt purchases from banks to spur lending. Nintendo, maker of the Wii game machine, sank 4.8 percent in Osaka as Deutsche Bank said the company’s profit will decline from next fiscal year. Chugai Pharmaceutical Co. plunged 7.2 percent after its arthritis drug was linked to deaths.

The Topix index was little changed at 760.67 as of 1:49 p.m. in Tokyo, with about the same number of shares rising and falling. The Nikkei 225 Stock Average lost 27.34, or 0.3 percent, to 7,921.79, erasing an early 1.3 percent climb.

“The problem is we’re not seeing much new money flowing into the market, so investors are simply funding some stock purchases by selling others,” said Hideo Arimura, who oversees the equivalent of $1.9 billion at Mizuho Asset Management Co. “A safety net has been put in place for the banks, with expectations they will get capital support from the BOJ.”

The Nikkei has rallied 13 percent since falling to a 26- year low on March 10. Financial and electronics companies have led gains despite dire profit outlooks as authorities moved to shore up the banking system and boost economic growth.

The Bank of Japan today said it will buy 1.8 trillion yen ($18.3 billion) of government bonds each month, up from 1.4 trillion yen now. The central bank yesterday outlined plans to provide as much as 1 trillion yen of subordinated loans to banks to revive lending and replenish capital sapped by falling stocks.

“At the moment, the capital adequacy ratio is a constraint, so by providing the subordinated loans to the banks, banks can extend more loans,” Masaaki Kanno, chief economist at JPMorgan Chase & Co. in Tokyo and a former central bank official, said in an interview with Bloomberg Television. “In the future, the BOJ could increase the total amount of the offer.”

Resona gained 4.6 percent to 1,499 yen. Sumitomo Mitsui Financial Group Inc., Japan’s second-largest bank by market value, added 2.8 percent to 3,340 yen. Orix Corp., the nation’s largest non-bank financial company, soared 9.5 percent to 2,930 yen, after rising by its daily limit yesterday.

U.S. stocks advanced yesterday after the Commerce Department said work began on an annualized rate of 583,000 homes in February, while economists had predicted a drop. That was a 22 percent surge from January, the most since 1990.

Nintendo slumped 4.8 percent to 28,490 yen in Osaka trading, making it the biggest drag on the Topix. The shares were rated “sell” in new coverage by Satoru Kikuchi, a Tokyo-based analyst for Deutsche Bank, who predicted slowing sales of the Wii and DS players and game titles.

Capcom Co., publisher of “Resident Evil” game series, fell 2.7 percent to 1,579 yen, while Konami Corp., maker of “Metal Gear Solid” games, sank 2.4 percent to 1,437 yen.

Chugai Pharmaceutical Co., the Japanese unit of Roche Holding AG, tumbled 7.2 percent to 1,477 yen, making it the Nikkei’s third-biggest loser. The company’s Actemra arthritis treatment was linked to 15 deaths and 221 cases of severe side effects in a trial of 4,915 patients, Chugai said on its web site.

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