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Nikkei ends firmer as banks recover after tax woes

TOKYO: Tokyo's benchmark Nikkei average closed firmer on Wednesday, with banks recovering after sharp falls the previous two days due to a proposal by the Tokyo municipal govement to impose a new tax on big banks.

Banks rebounded after major credit rating agencies indicated the proposed tax would not affect Japanese bank ratings, traders said.

But corporate selling of cross-held shares ahead of end-March book closings continued to weigh on large-cap high-tech shares such as Nippon Telegraph and Telephone Corp (NTT), which rose earlier this month, they said.

Overall, however, decliners outnumbered gainers 656 to 599 with 106 issues unchanged on the TSE's first section.

On the Tokyo Stock Exchange, the benchmark Nikkei average of 225 leading shares gained 231.35 points or 1.19 percent to 19,599.18.

The capital-weighted TOPIX index of all shares listed on the first section of the Tokyo Stock Exchange (TSE) posted a more modest gain, edging up 0.98 points or 0.06 percent to 1,691.12.

The March Nikkei future: rose 300 points to close at 19,700. Wednesday's first-section trading volume totalled to 805.18 million shares, against on Tuesday's 815.47 million.

Among other indices, the Nikkei 300 rose 0.49 point or 0.16 percent to 307.33, but the second section of mainly smaller issues slipped 27.89 points or 1.02 percent to end at 2,695.60.

Many analysts have estimated that Tokyo's local tax on big banks, aimed at helping to narrow the city government's yawning budget deficit, if it takes effect, would cut the banks' average net income by about five billion yen a year.

But Reiko Toritani, director for financial institutions of ratings agency Fitch, said in an interview on Wednesday that the impact of the planned tax on banks' earnings would not be significant.

Separately, Moody's Investors Service, another international credit rating agency, raised its long-term debt ratings on three Japanese city banks due to merge later this year: Industrial Bank of Japan Ltd (IBJ), Dai-Ichi Kangyo Bank Ltd (DKB) and Fuji Bank Ltd .

Buoyed by the announcement, ended up 72 yen or 9.35 percent at 842, ended 63 yen or 8.02 percent higher at 849 and Fuji Bank was up 64 yen or 7.88 percent at 876.

From a microeconomic point of view, the financial sector contributed most to the Nikkei's rise on Wednesday, said Masaaki Higashida, deputy general manager at Nomura Securities Co's investment information & service department.

But growing hopes for a domestic demand-led recovery after last week's strong machinery orders for December, often seen as a sign of more capital spending, was providing a solid support, he said.

"Market risk and corporate earnings risk are both seen withering, and that means there is still room for the Nikkei to rise," Higashida said. Other active movements were dominated by individual issues including those in companies that announced earnings results and forecasts on Tuesday and on Wednesday.

Arabian Oil Co (AOC) surged by its daily limit of 200 yen or 18.21 percent to 1,298, one of the highest percentage gainers on the first section.

Visiting Saudi Oil Minister Ali al-Naimi said on Tuesday that his nation is committed to maintaining good ties with Japan, fuelling speculation of stepped-up efforts to renew AOC's oil concession in the Saudi portion of the Neutral Zone, which expires on February 27.

After meeting with al-Naimi, Japan's Trade Minister Takashi Fukaya said on Wednesday the government has no plans to make any new proposal on the renewal issue, but said he had been told that Saudi authorities were prepared to meet the president of AOC, who was due to fly to Riyadh later in the day.

Some other oil firms, such as Showa Shell Sekiyu and Japan Energy Corp, were also higher, reflecting high-flying oil futures prices on NYMEX overnight, where they reached the highest levels since the 1991 Gulf War.

Major maker of cameras and copiers Minolta Co ended up 23 yen or 5.93 percent at 411.

Its shares had risen to a high of 425 yen by midday ahead of Wednesday's announcement by President Yoshikatsu Ohta that he expects increases in the company's parent and group profit and sales in fiscal 2000/01.

Honda Motor Co Ltd, Japan's second-largest automaker, rose 110 yen or 2.97 percent to 3,810. Its earnings released on Tuesday came in at the high end of expectations, with group operating profit in the October-December quarter at 105.78 billion yen, down 23 percent from a year earlier.

Electronics device maker Corp, which also announced its earnings results on Tuesday, jumped by its daily limit of 1,000 yen or 10.54 percent to 10,490.

TDK said its group operating profit slid more than five percent in the October-December period, hurt by the stronger yen. On an after-tax net basis, however, its consolidated profit rose 13.2 percent to 12.15 billion yen.-Reuters