Japan Stocks Rise on Weaker Yen as U.S. Rate Hike Bets Increase

Shares in Tokyo rose and the yen weakened as the prospect of Federal Reserve tightening boosted the dollar while Japan’s central bank head said he saw a possibility of expanded stimulus as soon as next month.

Japanese stocks gained a second day on volume 27 percent below the 30-day intraday average at the trading break, while the yen traded near its lowest level since 2014. Fed Vice Chairman Stanley Fischer signaled that a 2016 rate hike is still under consideration. BOJ Governor Haruhiko Kuroda said in an interview published Saturday in the Sankei newspaper that there’s a “sufficient chance” the bank will add to its unprecedented easing at September’s policy meeting.

“The yen is heading for more weakening against the dollar as interest rates diverge with the U.S., which the market is taking positively,” said Shoji Hirakawa, chief global strategist at Tokai Tokyo Research Center. “There are views in the market that insist there are no options left for more easing, but Mr. Kuroda probably wants to leave them with hope that there are multiple approaches he could take.”

The BOJ won’t hesitate to act based on discussions on the results of a comprehensive review at its September 20-21 board meeting, Japan’s central bank governor said in the Sankei interview. Kuroda regularly says the central bank won’t hesitate to add stimulus when needed, but he appears to be moving beyond his usual phrasing. He said there is “technically” room for deeper negative rates while ruling out the use of so-called helicopter money.

Negative Rates

Banks weighed most heavily on the Topix on Monday amid concern negative interest rates could cut into their profits. Mitsubishi UFJ Financial Group Inc., the biggest lender, fell 1.3 percent.

“If market expectations for a deepening of negative interest rates strengthens, the rebound in bank shares is going to slow down,” said Nobuhiko Kuramochi, head of investment information at Mizuho Securities Co. in Tokyo.

About twice the number of shares rose as fell on the Topix, with just seven of the 33 industry groups declining.

Agricultural stocks led drops on the Topix, with seafood-products manufacturer Nippon Suisan Kaisha Ltd. sinking 13 percent after saying it plans to sell shares to raise as much as 16.8 billion yen ($167 million).

West Japan Railway Co. rose 3.3 percent, while East Japan Railway Co. added 3.7 percent. Both were among the biggest gainers on the Nikkei 225.

Oil explorer Inpex Corp. dropped 3 percent after oil prices fell as Iraq seeks to increase exports amid a global overhang of crude inventories.

Futures on the S&P 500 Index fell 0.2 percent. The underlying measure dropped 0.1 percent on Friday as phone companies had their worst week since 2014 and amid elevated valuations and rising speculation that borrowing costs will increase before year-end. The probability of the Fed hiking rates by the end of the year was 51 percent on Friday, up from 42 percent a week earlier.