Stronger yen hits Japan's 'revival'

FAINT signs that Japan's economy is beginning to revive failed to inspire investors today, as the strengthening yen threatened to blunt the country's exports edge and damage sales and earnings. As the yen continued to test six-week highs, after adding almost 4% this month, the Nikkei 225 went the other way and shed 107.33 to 11,541.39.

Other Asian markets continued to run out of steam after the blistering pace earlier this year which has now given way to a bout of profit-taking despite the improving economic outlook. The possibility that recent optimistic noises by Japanese politicians might prove accurate was raised by a drop in the number of unemployed from 5.3% to 5.2% in March, taking the jobless total further from the record 5.5% hit in December.

Households also spent 1.1% more in March than in February, but the money did not go into the retail chains, where total sales fell 0.7%. A reminder that deflation still holds the economy in its grip came from the latest consumer price index, which was unchanged year on year, but which showed a record 0.8% decline in 2001.

Japan's big carmakers, who rely on the US market for up to 80% of their sales, were battered by the rising yen and Toyota fell more than 2%. Honda, which is expected to report record earnings on the back of good US demand last year, slipped 1%.

Stocks of electronics giant Sony Corporation fought the tide and rose 0.5% after forecasting yesterday that its operating profits would more than double this year on blazing sales of its PlayStation 2 video games console. Sony's optimism rubbed off on Panasonic group Matsushita Electrical, which gained almost 2% ahead of figures due later today .

A prediction from the United Nations that Asia's developing economies would grow 4.2% this year, against last year's 3.21%, failed to prevent profit taking.

Continued weakness in the price of electronics components triggered more heavy selling by foreign institutions in Taiwan, where the Weighted Average tumbled 74.54 to 6281.05.

South Korean stocks reduced the angle of their recent dive, but the Kospi still weakened 0.85 points to 871.73, leaving the market's rise this year at 27%, against 33% earlier this month. Chipmaker Hynix continued to climb, and added 5% despite warnings from key workers that they will resign if the proposed sale of key assets to the US Micron group goes ahead.

Hong Kong stocks retreated and the Hang Seng index lost 24.21 to 11,385.08, ending the recent modest bull run which reflected growing optimism on the economy and a shift to an overweight position by a number of brokers and fund managers. Bank shares rose in Sydney after Australia and New Zealand Bank provided an encouraging start to the reporting season with an 18% jump in profits, and the All Ordinaries rose 5.10 to 3329.2.

Somnolent trading in Singapore left blue-chips mixed and the Straits Times index down 0.9 at 1,728.32. Malaysian stocks rallied to take the Kuala Lumpur Composite index up 1.86 points to 801.37 and Thailand's SET advanced 3.40 points to 376.44, ending a week of falls. Jakarta's Composite fell 4.624 points, to 539.963, despite an upgrading in the country's credit rating by Moody's.

Prices and indices in this report are from various sources and calculated at different times and may not always match those listed elsewhere on the site.