Yen Gained as Business Confidence Improves

Yen gained against its counter parts as a report showed that business are expecting to increase their capital expenditure. Stocks also advanced led mostly by oil trading companies and machinery makers. Bond prices fell on speculation that upcoming auction might push prices down.



Japan’s Business Confidence Holds Near Two-Year High:
Confidence among Japan’s largest manufacturers held near a two-year high and companies said they’re increasing spending, supporting the central bank’s argument for raising interest rates. The Tankan, Japan’s most closely watched business survey, showed confidence among large manufacturers was unchanged at 23 points in June from March and near December’s two-year high of 25, the Bank of Japan said in Tokyo today. The result matched the median estimate of 26 economists surveyed by Bloomberg News. A positive number means optimists outnumber pessimists. Sentiment among service companies held at a 15-year high of 22 points for a third quarter as the export-led expansion created jobs and spurred consumer spending. The report supports expectations the bank will raise its key 0.5 percent overnight rate, the lowest among major economies, as soon as August.

Citigroup Spies Recovery at Scandal-Hit Japan Investment Bank:
Citigroup Inc.‘s investment-banking unit in Japan is managing the nation’s fourth-biggest share sale this year, its largest underwriting assignment since the government sold stock in Toyota Motor Corp. in November. Nikko Citigroup Ltd. is arranging the sale of about 80 billion yen ($649 million) of new shares by property trust DA Office Investment Corp. Citigroup, the world’s biggest financial-services company by market value, is trying to revive its Japanese business three years after regulators shut down its private bank in Tokyo and barred the company from bidding in government-bond auctions. The New York-based firm bought investment-banking partner Nikko Cordial Corp. in April for $7.7 billion after an accounting scandal at the nation’s third-biggest brokerage.
Honda Motor May Increase Profit Forecast on Weak Yen:
Honda Motor Co., may increase this month its profit forecast for the current financial year because of the ``favorable impact’’ of the yen’s decline, Chairman Satoshi Aoki said. The automaker estimated in April profit will drop 2.9 percent to 575 billion yen ($4.7 billion) in the year to March 31, from 592 billion yen the previous year. A weaker yen boosts the value of repatriated profits from the U.S. and Europe for Honda, which earns as much as 70 percent of its net income in the U.S. The yen fell 4.3 percent last quarter versus the dollar.
Yen was gained against the dollar as the survey of business sentiment issued by the government today stated that companies expect to increase their capital spending. This helped favor the expectation that Bank of Japan might increase interest rates by August by another 25 basis points to 0.75%. As of 3:00am New York time, USDJPY was trading at 122.85.

Japanese stocks rise for the third day led mostly by oil trading companies as oil prices reached to a 10-Month high. The stocks of machinery makers also closed high as the Business sentiment survey today showed that companies increased their planned investment for the next year. The Nikkei closed at 18,146.30, up 0.4 percent. The trading industry was the best performer amongst other 33 industries gaining 1.6 percent for the day. Property developers continue to fall as banks keep raising interest rates on fixed-mortgage.

The yield on the 10-year bond dropped 1.7 basis points closing for the day at 1.885percent on speculation that low yields in almost a month might not attract customers and drive prices further down in the upcoming auction tomorrow.