Tokyo Market Summary: Nikkei Average Falls, Bank of Japan Revises Interest Rate Manipulation and Accepts Long-Term Interest Rates Exceeding 0.5%

Top news
Bank of Japan revises interest rate operation and accepts long-term interest rate exceeding 0.5%
The Bank of Japan decided to revise long and short interest rate manipulation (yield curve control, YCC) at the monetary policy meeting held on the 28th. The upper limit of long-term interest rates is set at 0.5%, and then it is acceptable to exceed 0.5% to a certain extent according to market trends. There is an aim to soften policy management that suppresses interest rates through mass purchases of government bonds and mitigate market distortions.

Bank of Japan drastically raises the level of unlimited purchases of 10-year bonds at 1%
On the afternoon of the 28th, the Bank of Japan notified market participants that it would carry out an “index price operation (open market operation)” to buy an unlimited number of new 10-year bonds, etc. that are indicators of long-term interest rates. Buy an unlimited number of new 10-year government bonds etc. at 1.0%. It was implemented at 0.5% on the morning of the same day, but a drastic increase in the level was decided at the monetary policy meeting.

Bank of Japan raises price forecast to rise 2.5% in fiscal year 23
The Bank of Japan announced the outlook (outlook report) on the economic and price situation after the monetary policy meeting on the 28th. The forecast for the year-on-year increase rate of increase in the consumer price index (excluding fresh food = core CPI) was revised upward to 2.5% in fiscal 2023. It was 1.9% in fiscal year 24 and 1.6% in fiscal year 25, and in numerical terms, it is expected that the price stability target of the government and the Bank of Japan will continue to be around 2%. The movement for companies to pass on high costs to prices continues.

Toyota ranks first in the world with record high sales in global production from January to June
$Toyota Motor(7203.JP)$Group global production volume for 2023/1-6 announced on the 28th (Daihatsu Motor, $Hino Motors(7205.JP)$(included) hit a record high of 5.62 million units, a 10% increase compared to the same period last year. In addition to mitigating semiconductor shortages, increased production capacity in North America and Asia contributed. Global sales increased 5% to 5.41 million units, making it certain that it will hold the top position in the world for 4 consecutive years in the first half of the year.

Toyota sells part of KDDI stock, 20% of holdings for 250 billion yen
$Toyota Motor(7203.JP)$Owned by $KDDI(9433.JP)$It became known on the 28th that they had solidified a policy to sell part of the stock. It is expected that about one-fifth (approximately 250 billion yen) of the holdings will be sold. Toyota is a major shareholder of KDDI, and has invested in Japan Mobile Communications (IDO), etc., one of KDDI's predecessors. Policy holdings with low asset efficiency will be sold, and funds will be allocated to electrification shifts such as electric vehicles (EVs).

20 billion yen subsidy for semiconductor raw material production Ministry of Economy, Trade and Industry, JFE Steel, etc.
The Ministry of Economy, Trade and Industry announced on the 28th that it will subsidize a maximum of 20 billion yen for semiconductor raw material production equipment, etc. JFE Steel and $Iwatani(8088.JP)$It targets 7 companies, etc. We support costs such as production of rare gases used as raw materials for semiconductors and storage of helium. We will support securing raw materials for stable domestic semiconductor production.

Kansai Electric Power Company to restart Takahama Nuclear Power Plant Unit 1 in the afternoon for long-term operation
$Kansai Electric Power(9503.JP)$On the afternoon of the 28th, Takahama Nuclear Power Plant (Takahama-cho, Fukui-ken) Unit 1 will be restarted. Operation has stopped since the Great East Japan Earthquake, and it will be the first time in 12 years of operation. Forty-eight years have passed since Takahama Unit 1 began operation, making it the oldest remaining nuclear power plant in Japan. It seems that it will impress that the long-term operation of nuclear power plants by major electric power companies will begin.

Notable stocks
Mitsubishi UFJ expands backfield increases, and Bank of Japan to implement daily index price operations with YCC flexibility and 1% yield
$Mitsubishi UFJ Financial Group(8306.JP)$The increase was extended to the rear. The Bank of Japan announced at the monetary policy meeting held by the 28th that it will make the operation of long and short interest rate manipulation (yield curve control, YCC) flexible. The upper limit of the fluctuation range of long-term interest rates is “about 0.5%” as before, but in principle, index value operations with a yield of 1.0% are carried out every business day for 10-year government bond interest rates.

Yakult - sharp fall in the back market, 15% increase in 1Q operating profit also below consensus
$Yakult Honsha(2267.JP)$plummeted in the backfield. The company announced at 14:00 on the 28th that consolidated operating profit for the 24.3 period 1Q (April-6) was 17 billion yen (up 15.0% from the same period last year). The market consensus is 17.8 billion yen.

Denso is weak, and the upward revision of the final profit forecast for the current fiscal year also falls short of market expectations
$Denso(6902.JP)$is soft. On this day, an upward revision of the consolidated earnings forecast for the fiscal year ending March 24 was announced. The final profit forecast has been raised from 383 billion yen so far to 444 billion yen (up 41.1% from the previous fiscal year). At the same time, the implementation of a 1:4 stock split and dividend increases were also announced, but the revised final profit forecast fell below market consensus. Currently, the exchange rate is rapidly swinging in the direction of yen appreciation, so the attitude of buying up was limited.

Nidec - Reduction in decline Minister Nishimura says “40 billion yen will be supported by improving production capacity of speed reducers for industrial robots”
$Nidec(6594.JP)$The decline range has been reduced. Reuters reported on the 28th that Minister of Economy, Trade and Industry Nishimura Yasutoshi stated at a press conference after the cabinet meeting on the 28th that he would support 40 billion yen by improving the production capacity of the company's speed reducers for industrial robots.

M3 - Bank of Japan overcomes YCC upper limit by 0.5% and sells acceptance plan to growth stocks
$M3(2413.JP)$is drastically cheaper. The morning edition of the Nihon Keizai Shimbun dated 28th reported that the Bank of Japan will discuss amendments to long and short interest rate manipulation (yield curve control, YCC) at the monetary policy meeting to be held today.