Japan stocks rise to three-month high

Tokyo - Japanese shares rose to a three-month high after the yen fell on Friday following a weaker-than-expected US jobs report.

The benchmark index pared gains in afternoon trading as the currency rebounded on comments by Bank of Japan Governor Haruhiko Kuroda.

The Topix index rose as much as 1.2% before giving up most its advance as automakers and other exporters pulled back from a rally earlier in the session. It still closed at the highest since June 8.

The US jobs report was seen as putting pressure on Japanese monetary policy makers to increase monetary stimulus as expectations for a September Fed rate hike receded. In a speech in Tokyo, Kuroda declined to rule out new initiatives to stoke inflation, but refrained from specifying what options are available.

Security Percent Change Price Topix +0.2% 1 343.85 Nikkei 225 +0.7% 17 037.63 Yen-Dollar +0.6% 103.33
"What Mr. Kuroda actually said didn’t veer far from what he usually says," said Takuya Takahashi, a Tokyo-based senior strategist at Daiwa Securities Group. "That said, it seems to have been used as a reason in the currency market to shift positions.

Initially, US data and the rise in US shares were positive factors in Japan, but we saw position adjustments later in the day."

The yen gained after Kuroda’s speech, and was at 103.46 per dollar as of 3:25 p.m. in Tokyo, having weakened to 104.32 on Friday in New York.

Though the Topix has climbed 12% from a June 24 low, it remains the second-worst performer among developed-market indexes this year as investors try to gauge the direction of monetary policy ahead of US and Japanese meetings this month.

The yen has weakened after briefly strengthening beyond 100 per dollar last month, fuelling a recovery in exporters, while financial shares have been rebounding on expectations that the BOJ will refrain from expanding its controversial negative interest rates policy.

US nonfarm payrolls climbed 151 000 last month following an upward revision to 275,000 for July, according to the Labour Department. The median forecast in a Bloomberg survey was for 180 000 jobs in August.

Futures data showed the odds of a Fed rate increase in September stood at 32% as of Friday, down from 42% a week earlier. The jobless rate and labour participation rate held steady, while wage gains moderated.

Trading houses and electric-appliance producers provided the biggest boost to the Topix on Monday, as all but eight of the 33 industry groups on the gauge advanced.

Uniqlo stores operator Fast Retailing Company added 4%. SMBC Nikko Securities aid in a note on Friday that August sales, which fell 1% from a year earlier, were relatively robust in an environment where all apparel companies struggled.

TDK Corporation climbed 3.9% after Mizuho Securities Company raised its target price for the electronic-components maker. TDK also announced the establishment of an automotive inverter joint venture with Toshiba Corporation Shipper Mitsui OSK Lines was the second-biggest gainer on the Nikkei 225 Stock Average, advancing 6.6%.

The receivership of Hanjin Shipping Company, South Korea’s biggest container line, “may help make recent general rate increases implemented on September 1 more sticky for the rest of the industry,” according to Bloomberg Intelligence analyst Lee Klaskow.

A gauge of bank shares was the biggest drag on the Topix, as Mitsubishi UFJ Financial Group Inc., the biggest megabank, dropped 1.5%, reversing earlier gains.

Japan’s labour ministry reported on Monday that average monthly base pay, excluding overtime and bonuses, rose 0.4% in July from a year earlier to ¥241 518. That was the first increase in four months, but is unlikely to offer much relief to the BOJ as it undertakes a review of policies meant to stoke inflation and growth.

"I expect the yen to keep on trending a little weaker until the next FOMC meeting," said Seiji Iwama, a fund manager with Daiwa SB Investments in Tokyo. It’s really difficult to tell what the BOJ will do, "but for the next meeting, I expect them to simply review what they’ve done so far and leave it at that.

We’ve had a lot of surprises in monetary policy but it’s becoming more and more difficult for them to get something surprising out," he said.

Futures on the S&P 500 Index climbed 0.2%. The underlying measure rose 0.4% on Friday after falling for three days. US equity markets are closed on Monday for Labour Day.