Japanese shares rose for the fifth straight session today, led by exporters on the yen's weakness.
The Nikkei hit a eight-month high, climbing 0.3% to 15,948.29, its highest close since Jan. 8. The Topix rose 0.2% to a six-year closing high at 1,313.72, while the JPX-Nikkei Index 400 gained 0.2% to 11,905.53.
Revised figures now show that Japan's real GDP shrank an annualized 7.1% between April and June, topping the 6.8% fall reported two weeks ago, due to a bigger than expected decrease in capital expenditure and decline in consumer spending.
The contraction marks the country's biggest slump since the first quarter of 2009, and puts pressure on Prime Minister Shinzo Abe's decision, expected by year-end, on whether to proceed with a scheduled second increase in the sales tax to 10%.
Japanese shares soared today, led by exporters and the yen slipping to a seven-month low against the dollar. Traders said a planned cabinet reshuffle by Prime Minister Shinzo Abe also supported sentiment.
The Nikkei hit a seven-month high, climbing 1.2% to 15,668.60. The Topix rose 1.1% to 1,297, while the JPX-Nikkei Index 400 gained 1.1% to 11,763.89.
Compared to its previous hike, the Japanese government needs to be more cautious regarding its upcoming decision to raise the national sales tax, warns Vice Economy Minister Yasutoshi Nishimura.
Nishimura highlights that the sharp decline in consumer spending from the 3% tax hike in April is proving prolonged, and hopes that the Bank of Japan will decide on further monetary easing as appropriate.
Meanwhile, Prime Minister Shinzo Abe is to soon decide whether to proceed with the proposed plan of raising the national sales tax even higher, lifting the rate to 10%.
Japanese stocks rose to a three-week high this morning, posting large gains for the ninth consecutive day, as a weaker yen shored up exporters after Fed meeting minutes raised the risk of an earlier interest rate hike.
The Nikkei closed at its highest level since July 31, climbing 0.9% to 15,586.20. The nine-days of straight gains was the index's longest streak since December.
The Topix also gained 0.9% to 1,291.19, while the JPX-Nikkei Index 400 rose 0.9% to 11,752.54.
Japan's economy contracted sharply in the second quarter after a national sales tax in April rose 3% and triggered a sharp decline in consumer spending.
Real gross domestic product shrank 6.8% in the three months through June on an annualized basis from the prior quarter.
Prime Minister Shinzo Abe will have to address the tax issue again soon. A sales tax increase (which will raise the rate to 10%) has been approved by the Japanese government and will take effect in October 2015.
Also helping to boost the Nikkei to a 2.4% bounce overnight following a 3% plunge on Friday was a report on the Government Pension Investment Fund temporarily removing a cap on domestic stock investment.
The action enables the massive GPIF to allocate more funds to Japanese stocks ahead of the upcoming official review at which it's likely to be allowed to raise its goal for equities to 20% of the portfolio from the current 12%. "[It's] a surprise for the market in that they are going to increase their stock holdings sooner," says a local equities strategist.
Japanese stocks gained heavily this morning, posting their largest daily jump in four months. Easing tensions in Ukraine, and exporters on the rise due to the yen stepping back from its sharp gains last week - both contributed to the rise.
The Nikkei recouped most of its steep losses from Friday, soaring 2.4% to 15,130.52 - its largest daily percentage gain since mid-April. The Topix climbed 2% to 1,252.51, while the JPX-Nikkei Index 400 gained 2.1% to 11,402.48.
The Nikkei capped a tough week, falling 3% overnight with Obama's ordering of airstrikes in Northern Iraq a convenient excuse for the decline.
Today's session also happens to be the busiest earnings report day of the season and Nikon Corp. tumbled 9.4% after lower full-year guidance, Taiyo Yuden dove 8.9% after cutting its outlook, and Nisshin Steel plunged 9.8% after profit fell 99%.
The BOJ maintained its pledge to boost the monetary base by ¥60T-¥70T.
The dollar is weaker vs. the yen by 0.25%, with dollar/yen down to ¥101.83.
Japanese stocks fell to a more than one-week low this morning, with financials and sea transporters leading the losses, as investors turned risk averse due to the last week's U.S. stock sell-off and concerns over Argentina's default and Portuguese banking problems.
Japanese equities still drew some support from hopes of an improvement in domestic corporate earnings, as well as solid Asian shares and a stable currency market.
The Nikkei sank 0.3% to 15,474.50, its lowest close since July 25, extending losses for a third straight trading day. The Topix shed 0.4% to 1,276.19, while the JPX-Nikkei Index 400 dropped 0.3% to 11,620.36.
Dan Loeb's Third Point hedge fund is renewing a bet on Argentine government debt, expecting the country will reach a deal with creditors to resolve claims from its 2001 default by the end of the year, and is taking a stake in state-controlled oil company YPF (YPF +5.2%).
"We are in the midst of a critical inflection period for the country: If the government settles with its hold-out creditors, Argentina will regain access to global capital markets,” according to the hedge fund's Q2 letter to investors.
Third Point says Japan has been the biggest source of losses this year, but the firm is still finding opportunities in the country and expects macro conditions that have been headwinds to become more favorable toward the end of the year.
Earlier: YPF pops as Third Point is said to increase stake.
Japanese shares fell to a one-week low today and dropped to their largest one-day fall in three weeks after investors turned risk averse due to the downed Malaysian Airlines passenger jet shot down over Ukraine's eastern border.
The Nikkei sank 1% to 15,215.71, its lowest close since July 11. The index also fell 1.7% at one point during Friday's trading.
The Topix shed 0.8% to 1,263.29 at the close of trading in Tokyo. JPX-Nikkei Index 400 dropped 0.7% to 11,505.50.
The WisdomTree (WETF -1%) Japan Hedged Equity Fund (DXJ +0.4%) has seen $2.2B in outflows this year, including withdrawals of $490.4M on July 11 alone, according to Bloomberg.
It doesn't mean investors/traders don't want to bet on Japan; just that - with volatility all but vanishing from forex - they're not interested in hedging. By contrast, the iShares MSCI Japan ETF (EWJ +0.2%) - not hedged at all - has seen nearly $1B in inflows. "Most ETF buyers are not long-term investors and they’re betting the dollar-yen won’t move much in three to six months," says a Tokyo-based analyst with BNP Paribas.
It was 2013, when the DXJ took in a whopping $9.8B as Japanese stocks rallied hard and the yen fell just as sharply.
ProShares UltraShort MSCI Japan seeks daily investment results, before fees and expenses, that correspond to twice (200%) the inverse (opposite) of the daily performance of the MSCI Japan Index.
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