The Nikkei average came off five-week lows on Thursday after Japan intervened in currency markets to stem the yen's climb and the central bank eased monetary policy, but gave up earlier gains as worries about the global economy dominated. Two of Japan's oldest conglomerates, industrial electronics maker Hitachi Ltd and heavy machinery maker Mitsubishi Heavy Industries Ltd, gained in heavy trade and supported market sentiment after sources said they may merge.
Intervention pushed the yen down to about 79 yen to the dollar from a level of around 77 yen, but market players said that with the US and eurozone economic and fiscal woes unresolved, the impact of Tokyo's solo intervention may be limited. "The impact of the intervention may be short-lived as the view that the yen is still a safe haven currency hasn't changed amid concerns over the global economy," said Makoto Nagahori, head of equities at Instinet.
"If unemployment data confirms a stagnant recovery in the US economy this Friday the dollar will likely fall, and the yen may rise again anyway," he said. The benchmark Nikkei rose 0.2 percent to 9,659.18, while the broader Topix shed 0.1 percent to 826.36. The Bank of Japan said its asset buying programme will be expanded to 15 trillion yen, an increase of 5 trillion. It also expanded a programme offering cheap fixed-rate funds via its market operations by the same amount to 35 trillion yen and lifted its purchase target for exchanged traded funds to 1.4 trillion yen from 900 billion yen. "The stock market is not very appreciative of today's easing and intervention," said Ryoji Musha, president of Musha Research. "First, it was not co-ordinated intervention, and also the yen's rise is due mainly to an investor shift to safe haven currencies amid concerns about the US economy, not something that Japan can tackle on its own."
A merger of Hitachi and Mitsubishi Heavy would create one of the world's largest infrastructure firms with more than $150 billion in combined sales. Hitachi, the most actively traded firm by turnover on the main board, gained 1.7 percent to 471 yen and Mitsubishi Heavy rose 3.4 percent to 361 yen. "It's going to be a history-changing event if true," said Fujio Ando, senior managing director at Chibagin Asset Management.
"It would really be praiseworthy if they can really move this forward because a merger would mean they would be creating a new company with companies from different ex-zaibatsu business groups. This used to be seen as extremely difficult." The merger would be one of the largest ever in Japan. Hitachi, with a market value of $27 billion, would likely be the acquirer of Mitsubishi Heavy, valued at nearly $16 billion as of Wednesday's closing price.
Exporters gained in heavy trade, with auto giant Toyota Motor rising 0.6 percent to 3,140 yen, and Tokyo Electron, the world's No 2 supplier of chipmaking equipment, adding 1.7 percent to 3,955 yen. However, Tokyo investors remained wary ahead of a crucial US jobs report at the end of the week, which comes amid fears the American economy is stalling.
The pace of growth in the US services sector fell in July to its lowest since February 2010 and the pace of US private-sector job growth slowed in July with employers adding 114,000 positions, but the jobs additions exceeded forecasts. After the market close, the Nikkei publisher said that it will add Aozora Bank, Sony Financial and Amada to the Nikkei 225 benchmark.
It said it would remove Mizuho Trust & Banking, Mizuho Securities and CSK Corp from the benchmark. Volume was high, with about 2 billion shares changing hands on the Tokyo stock exchange's main board, the highest level since June 10. Declining shares slightly outnumbered advancing shares by 733 to 729.