Japanese Stocks Rally as Yen and Yields Fall

The markets in Japan have been rising as the Yen continues to decline and share prices of export companies lead the uptrend on prospects of higher profits. Fukui remains firm on his opinion that current available economic data does not clearly represent growth of the economy. Hence an interest rate hike is unlikely in the coming Bank of Japan policy-setting meeting. Carry trade by retail Japanese investors keeps pressuring the yen lower.

Japan government keeps view economy recovering: The Japanese government is sticking to its view that the nation’s economy is recovering despite some weakness in industrial production, but some cabinet ministers remain wary of recent rises in long-term interest rates. Revised government data showed last week that Japan’s economy grew an annualized 3.3 percent in January-March, outperforming both the United States and the Euro zone for the second straight quarter.
Source: Reuters

Government to tighten guidelines on foreign trainees: According to a new set of guidelines under consideration by the Justice Ministry, companies accepting foreign workers as trainees under the government-supervised foreign trainee program will not be allowed to take them on if foreign nationals have to come to Japan through brokering organizations. To prevent Japanese companies from using foreign trainees as cheap labor, the ministry will get tougher on current guidelines by outlining various conditions host companies must observe in addition to the current regulations.
Source: Daily Yomiuri Shimbum
Japan, U.S. firms to directly share defense info:
Japan and the United States are set to allow private defense contractors to directly share and transfer information on defense technology. The new system aims to increase the speed and efficiency of joint research and development. It will first be applied to the missile defense system. Tokyo and Washington are working together to be prepared for potential threats from North Korea.
Source: The China Post
[B][U]Currency Market:
The Yen continued its downtrend as the dollar reached 4 ½ year highs through Sunday. Many technical analysts believe that dollar is overbought on a shorter time frame; the Relative Strength Index of dollar against the yen rose to 75.53. Hence, many believe there is possibility of a small correction. The dollar traded at 123.58 yen as of 2:30 am in New York. The JPY is currently the worst performer among 72 major currencies. Bank of Japan Governor Toshihiko Fukui continues to stand strong on his opinion that policy makers need to examine more economic data before raising interest rates from 0.5 percent, encouraging investors to add to so-called carry trades. Japan?s currency also reached a 19-year low against the NZ Dollar. An NZDJPY long would have reaped a carry-adjusted 14 percent in the course of a year. Japanese retail investors? increased investment abroad in the last week due high yields has further reduced the value of yen. As a result, the Reserve Bank of New Zealand?s attempted intervention was unable to stall NZDJPY gains.

[B][U]Stock Market:[/U][/B]

Japanese stocks increased to their highest level today since February. The increase was partly fueled by less expected CPI levels of US on Friday indicating that Japan?s biggest overseas market will expand without adding inflation. The weakening of yen further benefited the stocks of all exporters especially the automaker and technology shares were amongst the leading gainers. The Nikkei 225 climbed 178.03 to 18149.52?a four-month high. Toyota Motor Corp., the world’s largest automaker by market value rallied to its best since March and Canon Inc., whose North American market contributed one third of sales last year, had the biggest gain in a month.

Japanese Government Bonds gained on speculation that the highest yields in a year should lure investors to domestic fixed income markets. Prices rose for the third consecutive business day as US-10 year yields fell from five-year highs. The yield on the 10-year fell 6 basis points 1.895 percent.