August 13, 2013 / 1:46 AM / 4 years ago

CORRECTED-Nikkei rises 2 pct led by exporters, corporate tax cut report

(Corrects Japan GDP to second quarter from first quarter in
tenth paragraph)
    * Corporate tax cut report benefiting automakers - trader
    * Machinery order data fails to impress market - analyst
    * Weak yen lifting exporters

    By Ayai Tomisawa
    TOKYO, Aug 13 (Reuters) - Japan's Nikkei share average rose
2.0 percent on Tuesday led by exporters on the yen's retreat
versus the dollar, while sentiment was lifted by a media report
the government is considering lowering the corporate tax rate.
    The Nikkei rose 263.62 points to 13,783.05 by
mid-morning. 
    Investors took heart from a Nikkei report, citing government
sources, stating that Prime Minister Shinzo Abe is considering a
corporate tax cut to offset the potential economic drag of a
planned two-stage hike in the sales tax.
    Traders said that if the corporate tax were reduced foreign
direct investment into Japan would likely be boosted, while
industrial hollowing-out -- where manufacturing is relocated to
countries with lower costs -- may be avoided.
    "It will depend on how much the government will be cutting a
corporate tax, but if this is realized, it should raise the
Nikkei's EPS," said Takatoshi Itoshima, chief portfolio manager
at Commons Asset Management, adding that the report is
benefiting such exporters such as Toyota Motor Corp,
which has promised to keep large facilities in Japan if domestic
production remains attractive.
    The yen's pull-back against the dollar lifted exporters,
with Toyota rising 1.6 percent, Honda Motor Co adding
1.6 percent and Panasonic Corp gaining 2.7 percent. A
weaker yen sharpens exporters' competitive edge in the global
market.
    "A yen's fall to the dollar accounts for several billion yen
in exporters' profit, so it's a pretty straightforward
reaction," said Fumio Matsumoto, a fund manager at T&D Asset
Management. 
    The dollar was last up at 97.43 yen, pulling away
from a seven-week low around 95.81 set last Thursday.
    The Topix rose 1.6 percent to 1,152.72, with all of
its 33 subsectors in positive territory.
    
    MARKET STILL CAUTIOUS ON DOMESTIC RECOVERY
    On Monday, the Nikkei fell to a 6 1/2-week low after Japan's
economy grew more slowly than expected in the second quarter.
    On Tuesday morning, government data showed that Japan's core
machinery orders fell 2.7 percent in June from the previous
month, compared with economists' median projection for a 7.2
percent decline. 
    Analysts said that the figure was better than expected, but
they were concerned that corporate investment weakness may not
have hit the bottom.
    "Company managements' mindset may not have recovered to the
same level as the market's," said Norihiro Fujito, senior
investment strategist at Mitsubishi UFJ Morgan Stanley
Securities. "When capital spending shows a recovery, that's when
we are comfortable with saying that the economy is recovering."
    The Nikkei is up 32 percent this year, but still 13.5
percent below its May peak of 15,942.60.

 (Editing by Shri Navaratnam and Eric Meijer)

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