Japan Stocks Rise on Commodities; Steelmakers Gain on Outlook

By Masaki Kondo

Sept. 17 (Bloomberg) -- Japanese stocks advanced as higher prices for oil and metals boosted commodity producers and after the Nikkei newspaper said recovering demand will prompt JFE Holdings Inc. to restart a mill.

Mitsubishi Corp., which jointly produces coking coal with Melbourne-based BHP Billiton Ltd., gained 2.8 percent after BHP said growth in emerging markets will keep the world short of resources. JFE, Japan’s second-biggest steelmaker, surged 5 percent. Sumitomo Mitsui Financial Group Inc. tumbled 5.6 percent on concern the incoming government’s policies will damage the consumer-finance business.

“Resource demand will increase over the long run and we can expect stable earnings at commodity producers,” said Naoki Fujiwara, chief fund manager at Shinkin Asset Management Co., which oversees the equivalent of $3.9 billion in Tokyo. “Investors expect the new government to favor policies helping socially weak people and tighten rules on consumer lenders.”

The Nikkei 225 Stock Average advanced 1.7 percent to close at 10,443.80 in Tokyo. The broader Topix index added 0.9 percent to 939.52, with five shares gaining for every two that retreated.

The value of stocks traded in Tokyo has stayed below the 12-month average in all but one of the past 30 days as investors took a wait-and-see attitude in the face of uncertainties over the new administration. Yukio Hatoyama, who replaced Taro Aso yesterday as Japan’s prime minister, pledged to save “hard- working people” from poverty by increasing minimum wages.

Exit Strategy

Japanese equities pared gains in the afternoon after the Bank of Japan raised its assessment of the nation’s economy.

“I’m afraid the BOJ will start talking about exit strategies including lifting interest rates and tightening liquidity,” said Shinkin’s Fujiwara “The economic situation isn’t” as bright as the BOJ maintained.

Mitsubishi, Japan’s biggest trading house by value, added 2.8 percent to 1,980 yen. BHP, the world’s largest mining company, said in its presentation material yesterday the world will be short of energy and copper in the medium to long term and global steel demand will double over the next 15 years. Melbourne-based BHP is the world’s No. 1 producer of coking coal through its alliance with Mitsubishi.

Mitsui & Co., Japan’s No. 2 trading house which counts commodities as its biggest source of profit, added 3.2 percent. Inpex Corp., the nation’s largest oil and gas explorer, added 3.5 percent. Crude oil climbed 2.2 percent to $72.51 a barrel, while gold futures added 1.4 percent to a record settlement price. Copper jumped 3.2 percent in New York.

Consumer Lenders

JFE, Japan’s No. 2 maker of the alloy, surged 5 percent to 3,390 yen, its steepest advance since July 28. It led a gauge of steelmakers to the biggest gain among the Topix’s 33 industry groups. The company may restart a scrap steel plant in Japan as early as October as orders recover, the Nikkei said.

Banks extended their decline to a fifth day on concern earnings will deteriorate. Sumitomo Mitsui, which owns a fifth of consumer lender Promise Co., dived 5.6 percent to 3,360 yen and was the most actively traded stock by value. Promise lost 4.4 percent to 604 yen. Banks were the biggest drag on the Topix.

A gap between the Nikkei and the Topix widened today to a level not seen in nine years, according to data compiled by Bloomberg. The gap was caused by bank shares because they have a bigger influence on the Topix than the Nikkei, said Makoto Haga, chief strategist at Tokyo-based Monex Group Inc.

“Lending is unlikely to increase in the current business environment, competition amid low interest rates is narrowing banks’ profits and there is a likelihood that financial companies will sell common stock to boost capital,” said Haga.

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