Japan Equities Show Signs of Recovery Helped by Strong Corporate Earnings

Japan equity markets ended just few points higher as favorable earnings helped reverse early declines sending bond yields higher. Yen was unaffected by the favorable industrial production data and slightly eased its gains.



[B]Abe Vows to Stay After Losing Japan’s Upper House[/B]
Japan’s Prime Minister Shinzo Abe said he won’t resign after voters angered by a botched pension system and government scandals handed his ruling coalition an overwhelming defeat in Japan’s upper house elections yesterday. The Mainichi newspaper said Abe should quit and call a general election. LDP secretary general Hidenao Nakagawa said this morning he will resign to accept responsibility for the ``heavy defeat.’'
Source: Bloomberg.com
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[B]Japan output rises, BOJ rate rise seen on track[/B]
Japan’s industrial output rose 1.2 percent in June from a month earlier for the first increase in four months, a sign that the economy’s weakest link is recovering and the Bank of Japan could still be on track to raise rates. The increase in June output beat a median market forecast for a 1.1 percent rise. Manufacturers were also bullish about the outlook, forecasting a 1.8 percent rise in output in July and a 4.9 percent increase in August, government data showed on Monday.
Source: Reuters
UPDATE 2-Japan output rises, backing case for rate hike | Reuters
[B]Tropical Storm Usagi Forms in Pacific, Heads Towards Japan[/B]
A tropical storm with winds gusting up to 93 kilometers (58 miles) per hour formed around 1,000 kilometers south south-east of Tokyo and was forecast to head toward Japan’s main islands, the Meteorological Agency said. Tropical storm Usagi, which has sustained winds of 65 kilometers per hour, was traveling west north-west at 24 kilometers an hour near the Northern Mariana Islands at 6 p.m.
Source: Bloomberg.com
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Yen traded mostly flat against most of its counterparts today. A government report showed that that industrial production in June rose 1.2 percent, 0.2 percent higher than what economists had expected. This increased the likelihood of BOJ raising interest rate in the upcoming meeting but did not bring any further increases in Yen. Investors see a 47 percent chance of a rate hike according to Credit Suisse. At 4:00 EST the pair was trading at 118.85.

Japan equities ended mostly flat after reversing from early declines. Early declines were triggered by a defeat for the Liberal Democratic Party in yesterday’s election and another significant decline in the US equities on Friday. The reversal was mostly due to higher expected earnings reported by companies. Steelmakers led gains after companies including JFE Holdings Inc. reported increased profits and boosted earnings forecasts. JFE said net income rose 63 percent to 754 million in the three months ended June 30. The company also raised its forecast for this year by 3.2 percent. Nippon Steel, said net profit increased 16 percent, while Nippon Metal said income soared to 3.5 billion yen from 75 million last year. Canon Inc. led exporters lower after U.S. residential investment slumped, raising concern the world’s largest economy will slow. Trading companies got a boost after Sojitz Corp. said during the break its quarterly profit jumped 45 percent as metals and energy prices climbed. The Nikkei closed 5.49 points higher at 17.289.30


Bonds fell as lowest yields in eight months stopped attracting investors. The yields on the benchmark 10 year rose 3.5 basis points closing at 1.815 percent.