Japanese shares resumed their Christmas rally on Tuesday after the country’s industrial production rose for the first time in three months, providing some hope that the economy could bounce back after a six-month pause.
Although production figures were slightly below consensus forecasts and were offset by other data showing a fall in household spending and continued deflation, markets reacted positively.
By the midday close, the Nikkei 225 stock average had risen 37.75 points, or 0.33 per cent, to 11,400, a three month intraday high. The broader Topix index also rose, putting on 0.3 per cent, to end the morning session at 1,138.27.
Industrial production rose 1.5 per cent against the 1.9 per cent consensus forecast, but the fact that it had bounced back at all seemed to reassure markets about future economic prospects. Weaker household spending figures were partially offset by strong department store sales.
Banks were big gainers with Mizuho, which on Monday upgraded its profits forecast after a windfall tax decision, rising 2 per cent to Y502,000. Banks have made a lot of progress cleaning up bad loans and investors are now hoping for a return to sustainable profitability if the economy keeps growing next year.
The other three big banks also rose. UFJ, the object of a takeover battle, put on 2.9 per cent to Y609,000, Sumitomo Mitsui Financial Group added 1.8 per cent to Y745,000 and Mitsubishi Tokyo Financial Group advanced 2 per cent to Y1.03m
Auto stocks fell on concerns that a stronger yen could harm exports, especially to the US. Toyota Motor, Japan’s biggest car company, fell 0.7 per cent to Y4,110, while Nissan, its second largest, fell by the same percentage to Y1,104.
Sadakazu Tanigaki, finance minister, said the government would be carefully watching the foreign exchange markets over the holiday period. However, in recent months the government has refrained from foreign currency intervention in spite of the strengthening Japanese currency.
By midday, the yen was trading at 103.18 to the dollar, slightly weaker than overnight in New York, where it had risen to 102.73, its highest level in three weeks./www.news.ft. com/