Yen Declines Sending Nikkei To Seven-Year High

Nikkei reached seven-year high on speculation that profits of exporters shall continue to surge as Yen further weakens against its major counterparts. It was also paced by rise in the earnings reported by some of the major retailers of Japan. Bond on the other hand weakened as people expect investors to shift money into the stock market.


Carlyle Says Hostile Bids to Spur Management Buyouts in Japan:
Carlyle Group’s top executive said today that management buyouts in Japan may increase as companies rush to fend off hostile takeovers. Hostile bids by investors including Warren Lichtenstein’s Steel Partners Ltd. and pressure to raise returns from activist shareholders may encourage companies to seek deals with private equity, said Adachi, 53. Carlyle invests only on friendly terms.
Japan’s Budget Deficit Will Shrink Further, Sumi Says:
Japan’s budget deficit will shrink further and the government aims for a surplus by 2011, said Chikahisa Sumi, director of debt management policy at Japan’s Finance Ministry. Prime Minister Shinzo Abe has pledged to balance the budget by 2011 by cutting spending and possibly raising the national sales tax from 5 percent. The government will probably reduce bond sales for a third year in the 12 months starting next April, Sumi said last week.

Japan Bond Rating on Review For Possible Upgrade:
Moody’s Investors Service yesterday gave its seal of approval to Japan’s efforts to rein in its massive debt, placing on review for possible upgrade the Japanese government’s A2 rating for domestic securities. The ratings firm, which downgraded Japan’s domestic debt rating by two notches in May 2002 to its current level, said a turning point had been reached on government debt, which is now on an improving trajectory.
Source: The Wall Street Journal

The dollar edged higher against the yen on the continuing wide interest rate gap between the U.S. and Japan. The U.S. dollar was trading at 122.71 yen midday, up from 122.61 yen late Wednesday. The Euro, meanwhile, rose to near its all-time high against the yen and might break above that level if European Central Bank chief Jean-Claude Trichet later in the day signals multiple rate hikes ahead. The leading economic indicator, which is the broadest measure of economy?s outlook, fell short of economist forecast indicating that BoJ is less likely to raise rates by August despite strong growth being experienced in the manufacturing sector.

Japanese stock market rallied on expectation that profits of exporters should continue to surge amid weak yen. Retail sector shares advanced after few major companies reported higher income in the first quarter. The Nikkei climbed 52.76 points closing at 18,224.48 reach to hits highest level in seven years. Later in the day; however, Nikkei gains pared as the broadest indicator of the outlook missed economist forecasts. Sony jumped 2.4 percent to 6,460yen. Toho Co., Japan’s largest film production studio by revenue, soared 7.3 percent to 2,350, after Deutsche Bank AG lifted its rating on the shares to buy'' from hold.’’.

Japan?s 10-year bonds plummeted for a second day mainly on speculation that a rise in stock prices might curb demand for government debt. The yields climbed 0.29 basis points resting at 1.924 for the day.