Japan Equities Almost Flat, Bond Yields Show Increased Concerns Over US Subprime Woes

Japanese equities closed almost flat after early rally triggered by strong earnings report from Nokia. Dollar inched slightly higher against the Yen as investors tried to take advantage of a rally in US blue chip stocks. The subprime concerns were visible in the bond market sending yields almost 3 basis points down.


Abe’s political problems jeopardize Japan’s support for U.S. Iraq, Afghanistan missions
Prime Minister Shinzo Abe’s shattering electoral defeat may threaten Japan’s support of U.S.-led operations in Iraq and Afghanistan, as an energized opposition seeks to redefine a key pillar of the country’s foreign policy ? its relationship with Washington. Fresh off its victory at the July 29 elections for parliament’s upper house, the main opposition Democratic Party of Japan has declared it will oppose extending the military’s operation supporting coalition forces in Afghanistan.
Source: International Herald Tribune

Australia and Japan Agree on New Tax Income Treaty
Australia and Japan have agreed to adopt a new income tax treaty that will boost investment in the nations’ stock markets. The agreement will reduce taxes on dividends and interest to 10 percent from 15 percent and cut royalties to 10 percent from 5 percent. The treaty replaces an existing agreement in place since 1969 and mirrors agreements Australia has signed with the U.S., U.K. and France.
Source: Bloomberg.com
Eighteen hurt as typhoon pounds Japan
Typhoon Usagi slammed into southern Japan late Thursday and veered to hit western provinces before crossing into the Sea of Japan (East Sea) where it is weakening. Usagi hit Japan just two weeks after a killer typhoon ravaged nearby areas.Municipal governments advised tens of thousands of people to evacuate amid gusts and downpours while the storm triggered 19 landslides on Kyushu.
Source: Forbes.com
Yen lost its strength for second consecutive day against the dollar as traders took advantage of rebound in the US blue-chip stocks. The dollar slid as low as 117.60 against the yen this week and continues to be tested at 118. Traders wait for the US Nonfarm payrolls data to decide whether yen?s rally should continue as it would give further confirmation of slowdown in the world?s largest economy. South Korea’s Finance Minister Kwon Okyu in comment today said that the yen’s weakness isn’t justified and that carry trades based on the Japanese currency threaten to destabilize global markets. By late afternoon trading, the dollar was up 0.3 percent against the yen at 119.16… The Euro also rose 0.5 percent to 163.26 yen.

Japanese stocks closed almost flat today giving up gains made earlier in the day as investors showed their concern about the possibility of further fallout from the problems in the US subprime loan market. The blue-chip Nikkei 225 Stock Average slipped 4.25 points to close at 16,979.86. The early rally was mostly due to strong earnings by NOKIA sending tech and cellphone stocks up. The bank stocks later pulled the average down on speculation that subprime woes would spread further.

Bond yields fell today on speculation that losses tied to mortgage will slow growth in the US, making it difficult for BOJ to raise interest rates. Yields on the benchmark 10-year bond were down 3.4 basis points at 1.765 percent.