Japan's Bonds Gain as Stocks Slump, Demand Rises at Auction - BusinessWeek

October 04, 2011, 3:13 AM EDT By Mariko Ishikawa

Oct. 4 (Bloomberg) -- Japan’s bonds rose, driving down 30- year yields for the first time in seven days, as stocks fell, boosting demand for the relative safety of government debt.

Benchmark 10-year yields dropped from near a one-month high on concern Greece will default and Europe’s debt crisis will worsen. Bonds also advanced after today’s auction of 10-year debt drew the highest demand in three months and as Goldman Sachs Group Inc. cut its forecasts for Japan’s economic growth and yields for the securities.

“The bond market is reflecting risk aversion,” said Toru Suehiro, a market analyst in Tokyo at Mizuho Securities Co., one of the 25 primary dealers obliged to bid at government debt sales. “Because there isn’t a fundamental resolution to the European problem, we may see a cycle of optimism and pessimism continue which will disappoint investors. I think pessimism will prevail in the end.”

Thirty-year yields fell 1.5 basis points to 1.905 percent at 3:26 p.m. in Tokyo at Japan Bond Trading Co., the nation’s largest interdealer debt broker. The 2 percent securities maturing in September 2041 rose 0.29 yen to 101.811 yen. Benchmark 10-year rates fell 2.5 basis points to 0.99 percent after touching 1.025 percent on Sept. 30, a four-week high.

Ten-year bond futures for December delivery advanced 0.27 to 142.54 at the 3 p.m. close of the Tokyo Stock Exchange. The Nikkei 225 Stock Average sank 1.1 percent.

Today’s sale of 10-year bonds drew bids valued at 6.3 trillion yen ($82.2 billion), or 3.15 times the amount sold. That was the highest ratio since July even after the coupon was set at 1 percent, the least since November 2010.

‘Slightly Stronger’

“The results for the 10-year auction were slightly stronger than expected,” said Reiko Tokukatsu, a senior fixed- income strategist at Barclays Capital Japan Ltd. “Bonds tend to find more buyers on dips because sentiment in financial markets has deteriorated” amid the worsening situation in Greece.

Goldman Sachs halved its forecast for Japan’s growth to 0.1 percent during the fiscal year ending March 2012 owing to a slowdown in the global economy. The company also cut its forecast for Japan’s 10-year yields to 1.1 percent in three months from 1.25 percent.

European finance ministers meeting in Luxembourg pushed back a decision on the release of Greece’s next loan installment until after Oct. 13. It was the second postponement of a decision originally slated for this meeting.

--With reporting by Masaki Kondo in Tokyo. Editors: Nate Hosoda, Rocky Swift

To contact the reporter on this story: Mariko Ishikawa in Tokyo at mishikawa9@bloomberg.net

To contact the editor responsible for this story: Rocky Swift at rswift5@bloomberg.net.

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Japan's Industrial Output Rises Less Than Expected, Weighed by Strong Yen - Bloomberg

Enlarge image Commuters crowd a train station in Tokyo. Employers cut payrolls by 160,000 and a further 200,000 workers retired or abandoned efforts to find a job, leaving the seasonally adjusted number of employed at 59.4 million.

Commuters crowd a train station in Tokyo. Employers cut payrolls by 160,000 and a further 200,000 workers retired or abandoned efforts to find a job, leaving the seasonally adjusted number of employed at 59.4 million. Photographer: Toshiyuki Aizawa/Bloomberg

Sept. 30 (Bloomberg) -- Curtis Freeze, founder of Honolulu-based Prospect Asset Management Inc., talks about Japan's economy, financial markets, and government. Freeze speaks from Tokyo with John Dawson on Bloomberg Television's "First Up." (Source: Bloomberg)

Japan’s labor force shrank last month to its smallest size since October 1987, when the nation’s stock-market benchmark was 185 percent higher and land prices were 85 percent greater than today.

Employers cut payrolls by 160,000 and a further 200,000 workers retired or abandoned efforts to find a job, leaving the seasonally adjusted number of employed at 59.4 million, the statistics bureau said today in Tokyo. Separate figures showed industrial production rose 0.8 percent from the previous month, less than all but three of 28 forecasts in a Bloomberg survey.

The data deepen concern that Japan’s recovery from the March earthquake will be stunted by manufacturers shifting operations abroad because of gains in the yen, a deterioration in consumer confidence and prospects for higher taxes at home. The challenges add to the burden of an economy already beset by a shrinking and aging population.

“We’ve seen an acceleration in the hollowing out of industry this year with the yen’s surge and the earthquake,” said Hiroshi Miyazaki, chief economist at Shinkin Asset Management Co. in Tokyo. “The government doesn’t have a sense of crisis about the yen and emerging economies are luring Japanese companies away.”

The yen traded at 76.74 as of 9:12 a.m. in London, about 1 percent from the post-World War II record high of 75.95 on Aug. 19. The Nikkei 225 Stock Average finished little changed at 8,700.29, compared with the peak of 38,915.87 when it closed out 1989, capping a four-year run when it soared almost 200 percent.

Prime Minister Yoshihiko Noda’s government on Sept. 27 said it will start implementing measures to cope with the yen’s gains, including subsidies for companies struggling to retain workers. Finance Minister Jun Azumi said today that Japan plans to bolster funds needed to intervene and lengthen monitoring of foreign-exchange market positions until the end of the year, from an initial plan to end the review this month.

“The yen staying around the high-70s could throw cold water on the Japanese economy’s recovery trend,” Azumi said at a press conference in Tokyo. “We will take bold actions when needed and we don’t rule out taking any necessary measures while closely monitoring speculative trading.”

Manufacturers including Panasonic Corp. have announced plans to shift operations overseas. Panasonic, one of the world’s largest consumer electronics companies, is moving the headquarters of its $57 billion procurement operation to Singapore from Osaka in the year starting April 2012, Masaaki Fujita, an executive in charge of the business, said this month.

Exports and retail sales data released this month also missed analysts forecasts, casting doubt on whether gross domestic product will rebound as much as forecast this quarter. GDP is expected to grow at a 4.6 percent annual pace in the three months through September, ending three quarters of decline, according to the average forecast of 42 economists surveyed by Japan’s government-affiliated Economic Planning Association.

The jobless rate fell to 4.3 percent in August from 4.7 percent as people left the workforce, today’s report showed. Household spending decreased 4.1 percent from a year earlier, compared with the median estimate in a Bloomberg News survey for a 2.8 percent drop.

A stagnating economy has also depressed consumer sentiment, with the nation’s Economy Watchers survey showing confidence among merchants and others who deal with consumers slipping to 47.3 in August, the first drop since March.

“I’m worried where things will go after this year, when we’ll start to see more of an impact from the strong yen and slowing growth in the U.S.,” said Noriaki Matsuoka, an economist at Daiwa Asset Management Co. in Tokyo. Reconstruction won’t be enough to fuel a “V-shaped rebound,” he said.

Japan plans to spend a total of 19 trillion yen ($247 billion) over five years for rebuilding after the magnitude-9 temblor and tsunami that devastated the northeast coast. The nation’s ruling Democratic Party of Japan this week proposed a 9.2 trillion yen temporary tax increase and selling of state assets to help pay for the effort.

In a sign that weaker global demand is affecting other Asian markets, South Korea’s industrial production also rose less than economist estimates in August, gaining 4.8 percent from a year earlier, Statistics Korea said today. Meanwhile, a gauge of Chinese manufacturing shrank for a third month in September, the longest contraction since 2009, according to the purchasing managers’ index released by HSBC Holdings Plc and Markit Economics today.

“Continuing yen strength will prompt companies to factor in a stronger yen in their business planning,” said Takahiro Sekido, a former analyst at the Bank of Japan and now a chief economist at Credit Agricole SA in Tokyo. “The biggest concern is the European debt crisis and the U.S. economy. With uncertain overseas demand,” Japan’s recovery may weaken, he said.

The International Monetary Fund predicted “severe” repercussions if Europe fails to contain its debt crisis or U.S. policy makers deadlock over a fiscal overhaul. Deepening debt woes in Europe have also put pressure on the yen’s exchange rate against its European counterpart, threatening to depress earnings at companies including Sony Corp.

To contact the reporter on this story: Aki Ito in Tokyo at aito16@bloomberg.net

To contact the editor responsible for this story: Paul Panckhurst at ppanckhurst@bloomberg.net

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Japan factory production rises for fifth month (AP)

By TOMOKO A. HOSAKA, Associated Press Tomoko A. Hosaka, Associated Press – Fri Sep 30, 4:51 am ET

TOKYO – Japan's factory production rose for the fifth straight month in August, almost restoring it to levels recorded before the March earthquake and tsunami disasters.

The improvement, however, is clouded by uncertainty ahead as Japanese manufacturers contend with a persistently strong yen and a fragile global economy.

Industrial output climbed 0.8 percent from the previous month, according to a Ministry of Economy, Trade and Industry report Friday. Sectors driving gains included transport equipment, electronic parts, and iron and steel.

The ministry said industrial production has almost fully recovered from the March disasters. But August's result undershot the government's earlier estimates, reflecting the new pressures on exports.

"It would be necessary to keep watch on future developments," the ministry said.

Exports are a key growth driver for the world's No. 3 economy, and any slowdown in overseas demand could thwart progress made since the disaster. The tsunami wiped out much of Japan's northeast coast, damaging factories and disrupting critical supplies for key Japanese industries such as autos and electronics.

Supply issues have been mostly resolved, and production is back to 96 percent of its pre-quake level, said Goldman Sachs economist Chiwoong Lee.

"Now that production is largely free of supply constraints, we expect it to directly reflect external demand conditions and start to weaken," Lee said in a research note.

Shipments rose 0.3 percent in August, while inventories expanded 2.1 percent.

The ministry expects industrial production to fall 2.5 percent in September before rising 3.8 percent in October.

Separately, the government says Japan's unemployment rate fell to 4.3 percent in August.

The result marked the first improvement in three months, but the figure may not reflect the true health of the job market, the Ministry of Internal Affairs and Communications said.

The report does not include the three prefectures hardest hit by the tsunami — Iwate, Miyagi and Fukushima. It also does not account for unemployed workers who have simply given up seeking jobs.

The government also released data on consumer prices and household spending.

The August core consumer prices index, which excludes volatile fresh foods, rose 0.2 percent from a year earlier on higher fuel costs. Preliminary CPI for the Tokyo area — considered an indicator of broader price trends for the country — fell 0.1 percent in September.

Meanwhile, average monthly household spending tumbled a real 4.1 percent from a year earlier as family incomes fell. The figure is a key barometer of private consumption, which accounts for more than half of Japan's gross domestic product.

Average monthly household income in August fell 1.7 percent from last year to 463,760 yen ($6,045), the ministry said.

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Japan storm death toll rises to 25, more missing (Reuters)

TOKYO (Reuters) – Japan's death toll from tropical depression Talas, earlier downgraded from a tropical storm, has risen to 25 with 52 missing, the government said Monday, as torrential rain pounded the west of the country at the weekend, triggering mudslides and bursting river banks.

Talas, which cut through Japan's main island Saturday and Sunday, was off the country's western coast as of 8:00 p.m. EDT, heading northeast, the Japan Meteorological Agency (JMA) said.

There were no reports of major disruption to factory operations and Tokyo Electric Power Co said its tsunami-crippled Fukushima Daiichi nuclear power plant, located in eastern Japan, has not been affected by the storm.

Talas has mostly moved at about 6 mph, roughly the speed of a bicycle, and its slow progress caused heavy and prolonged rainfall over Japan, the agency said.

"We'll do our utmost in terms of search and rescue operations," Prime Minister Yoshihiko Noda told reporters when asked about the disaster.

As Talas moves on, heavy rain is expected in the north of the country, though JMA warned residents of the west to remain on alert for landslides.

(Reporting by Kiyoshi Takenaka; Editing by Joseph Radford)

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