Tokyo stocks surge as Fed's hawkish comments send yen lower, exporters higher

Tokyo stocks closed sharply higher Monday after rallying for the first time in three trading days, as hawkish remarks from the U.S. Federal Reserve Chair Janet Yellen suggesting a rate hike in the near future was foreseeable, coupled with Bank of Japan Governor Haruhiko Kuroda committing to unrolling more stimulus if needed, saw the yen's retreat versus its U.S. counterpart giving exporters a boost.

The 225-issue Nikkei Stock Average added 376.78 points, or 2.30 percent, from Friday to close the day at 16,737.49, while the broader Topix index of all First Section issues on the Tokyo Stock Exchange advanced 25.34 points, or 1.97 percent, to finish at 1,313.24.

Local brokers said that a halt in the yen's persistent strength against the U.S. dollar following remarks from senior U.S. Federal Reserve officials at the end of last week lifted the market mood here and made exporter-linked shares an attractive proposition, as their company's profit outlooks and competitiveness overseas are boosted by a weaker yen.

Based on a speech given by Fed chair Janet Yellen at an annual monetary policy conference in Jackson Hole, Wyoming, in which she remarked that a case for a rate hike in the U.S. had strengthened of late due to an improving job market and moderately upbeat economic outlook, and underscored by the Fed's Vice Chair Stanley Fischer intimating that at least one rate hike and further policy-tightening could be expected before the end of the year, investors were seen piling into exporter shares Monday.

"The U.S. put off a rate increase in the wake of Brexit, and the view seems to be that the state of the country's economy has further improved. There's no reason to wait another few months for a U.S. rate hike," chief global strategist at Tokai Tokyo Research Center, Shoji Hirakawa, was quoted as saying, supported by other analysts highlighting the fact that the yen's retreat had alleviated some market fears about the outlook for domestic corporate profits and earnings.

Exporters in particular got a boost on the first trading day of the week as the U.S. dollar rose to the lower 102 yen range with the yen's comparative weakness supported by BOJ Governor Haruhiko Kuroda saying that the central bank here will institute more easing measures or further lower its already negative interest rate "without hesitation," if necessary.

"The Bank of Japan will continue to carefully examine risks and take additional easing measures without hesitation," Kuroda was quoted as saying at the monetary policy symposium, adding, however, that, "it could be that long-term inflation expectations are yet to be anchored in Japan."

As such, and despite underlying inflation concerns following Japan's core consumer prices released last week, showing that prices had declined for a fifth straight month in July and the most in three years, carmakers accelerated Monday, with Toyota Motor advancing 4 percent to 6,147 yen and Mazda Motor rising 6.4 percent to 1,612.50 yen.

Other exporters were among the day's top gainers, with Fujitsu Ltd. gaining 1 percent after announcing cost-cutting initiatives including the automation of the production of the majority of its mobile phones, and Mitsubishi Chemical Holdings Corp. soared 6.4 percent after its stock rating was upgraded from "neutral" to "outperform."

Among other issues that found traction, Japan Display jumped 4.3 percent to 146 yen following news Sharp Corp. is planning a joint-venture to mass-produce organic light-emitting diode (OLED) displays in 2018, to better compete with other leading display makes in the region, including Samsung Display, a unit of Samsung Electronics.

As for the week ahead, local traders said that all eyes were now focusing on the upcoming jobs report due out from the U.S. on Friday, which will, to an extend, further clarify the Fed's rate hike moves.

For the day, notable issues that closed in positive territory comprised marine transportation, insurance and transportation equipment-linked issues and those that advanced outpaced those that declined by 1,540 to 363.

Trading volume on the main section on Monday increased to 1.61 billion shares from Friday's volume of 1.54 billion shares and the day's turnover was 1,802.7 billion yen (17.61 billion U.S. dollars).

Source : XINHUA