Japan's Nikkei average rose 0.9 percent on Tuesday, with exporters such as Kyocera Corp rebounding after the yen pulled back from an eight-month high against the dollar. The yen has come down from the previous day's peak after Japanese Finance Minister Hirohisa Fujii appeared to backtrack on comments suggesting he was comfortable with the yen's recent strength.
The Nikkei's gains were limited, however, due to lingering worries about the potential for further yen strength, which erodes Japanese exporters' overseas profits when they are repatriated. "This probably shows that no one thinks this is over, even if the exchange rate has settled down for now," said Mitsushige Akino, chief fund manager at Ichiyoshi Investment Management.
"There seems to be a recognition that we are in a phase of yen strength where there could be a break above the January high of 87.10 yen," Akino said, referring to the yen's 13-year peak against the dollar hit earlier this year. If such yen strength persists, the risks of downward revisions to corporate earnings forecasts will rise, he added. Many Japanese exporters have set their exchange rate assumptions for the dollar around 90-95 yen for the current fiscal year to March.
The benchmark Nikkei rose 90.68 points to 10,100.20. The index slid 2.5 percent the previous day to mark its lowest close since July 24. The broader Topix edged up 0.1 percent to 904.00. Trade was light on the Tokyo exchange's first section, with 1.8 billion shares changing hands, below last week's daily average of 2.2 billion. The gains in Tokyo shares were tepid compared with gains in other markets in the region. The MSCI's broad measure of Asian equities excluding Japanese shares rose about 2 percent.
"There are some factors specific to Japan, such as what will happen to the yen's strength from here on," said Tsutomu Yamada, a market analyst at Kabu.com Securities. The yen stood at 90.06 yen to the dollar, having pulled back from the previous day's peak of 88.23 yen, which was the yen's highest since January. The yen dipped on Tuesday after finance minister Fujii said intervention might be an option if exchange rates make irregular moves.
Besides moves in the yen, market players were focusing on US data coming up this week such as the Institute for Supply Management's manufacturing survey and jobs data. In addition, Japanese industrial output data is due on Wednesday and the Bank of Japan's "tankan" survey of corporate sentiment will be released on Thursday. Among exporters, electronics parts maker Kyocera advanced 2.9 percent to 8,310 yen and industrial robot maker Fanuc Ltd gained 2.8 percent to 7,990 yen.
Honda Motor Co added 1.1 percent to 2,705 yen. Kobe Steel Ltd climbed 5.3 percent to 159 yen after the Nikkei business daily said the steelmaker would boost production of copper strip products to 5,000 tonnes a month, restoring output to a peak hit in the spring of 2008. Nonferrous metal manufacturer Dowa Holdings Co Ltd rose 3.8 percent to 547 yen after Mitsubishi UFJ Securities initiated coverage of the company's shares with a target price of 690 yen. Declining stocks outnumbered advancing ones, 826 to 719.
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