Japanese Stocks Snap 3-Day Slide on Weaker Yen, Profit Optimism

By Masaki Kondo

April 1 (Bloomberg) -- Japanese stocks snapped a three-day slide after the weaker yen lifted earnings prospects for automakers and a government report fanned optimism profit declines won’t accelerate.

Honda Motor Co., Japan’s No. 2 automaker, added 6.7 percent after the yen fell and on speculation market share will expand if U.S. automakers go bankrupt. Sony Corp., an electronics maker planning job cuts to cope with a record loss, rose 6.4 percent after a central bank survey showed businesses expect a narrower profit drop this year. Chuo Mitsui Trust Holdings Inc., Japan’s sixth-largest listed bank by assets, soared 11 percent after reducing stockholdings to preserve capital.

The Nikkei 225 Stock Average jumped 242.38, or 3 percent, to close at 8,351.91 in Tokyo, rebounding a three-day, 6.1 percent decline. The broader Topix index rose 20.16, or 2.6 percent, to 793.82, with three stocks gaining for each that fell.

“Businesses are getting out of the worst period in terms of earnings,” said Kiyoshi Ishigane, a senior strategist at Mitsubishi UFJ Asset Management Co., which oversees about $61 billion. “As the new fiscal year begins, fund managers are starting to buy into the market. Their purchases encompass a wide range of shares so as to track index performance.”

The Topix tumbled 36 percent in the fiscal year ended yesterday, the steepest tumble on record going back to 1969, as the global economy slipped into recession. The gauge’s constituents have traded at below their corporate net worth since Nov. 10.

‘Competitive’ Industry

Honda, Japan’s No. 2 automaker, surged 6.7 percent to 2,470 yen, and smaller rival Nissan Motor Co. jumped 10 percent to 385 yen. Market leader Toyota Motor Corp. rose 4.8 percent to 3,270 yen even after the Nikkei newspaper said the company will cut its second-half dividend for the first time since 1995. Automakers as a group contributed the most to the Topix advance.

U.S. President Barack Obama believes a quick, negotiated bankruptcy is the most likely way for General Motors Corp. to restructure and is prepared to let Chrysler LLC go bankrupt, people familiar with the matter said.

“Globally, the Japanese auto industry is the most competitive, and because of concern about the outlook and about the U.S., these companies are trading on very attractive valuations,” Diane Lin, a Sydney-based fund manager at Pengana Capital, which oversees about $1.9 billion, said in an interview with Bloomberg Television.

The Japanese currency depreciated to as much as 99.47 yen per dollar from 97.96 at the close of stock trading in Tokyo yesterday. The yen fell versus the euro to 131.89 from 129.55. A weaker Japanese currency boosts the value of overseas sales.

Job Cuts

Sony, the world’s second-biggest maker of consumer electronics, jumped 6.4 percent to 2,125 yen, while Komatsu Ltd., the world’s No. 2 maker of earthmoving equipment, leapt 4.4 percent to 1,117 yen. Sony has planned to eliminate more than 16,000 jobs by March 2010 as its operating loss is estimated to reach a record 260 billion yen in fiscal 2008. Komatsu said in January it’s eliminating 2,100 non-regular domestic jobs.

The Tankan index of sentiment among large manufacturers slid more than forecast in the quarter ended in March to the lowest since the survey began in 1974, the Bank of Japan said today. Pretax profit at large enterprises is expected to drop by 11 percent this business year, smaller than a 29 percent decline in fiscal 2008, according to the report.

Shinichi Ichikawa, chief strategist for Japanese equities at Credit Suisse Group AG, wrote in a report today the Tankan forecast for profit decline was narrower than the brokerage’s estimate for a 25 percent slump. Companies have to carry out deeper cost cuts to support earnings as sales continue to fall, he said.

‘Crisis’ Response

Chuo Mitsui soared 11 percent to 332 yen, the steepest jump since Jan. 27. The company yesterday said it sold shareholdings worth 248.2 billion yen ($2.51 billion) to prevent the volatility of the equity market from affecting its capital.

Japanese Prime Minister Taro Aso’s administration will compile a third stimulus package by mid-April to address the “economic crisis,” Aso said yesterday. His Liberal Democratic Party recommended buying shares to shore up the stock market and to preserve banks’ capital, while aiming to create 2 million jobs in three years.

Nikkei futures expiring in June added 3.2 percent to 8,380 in Osaka and jumped 2.7 percent to 8,350 in Singapore.

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