Yen Weakens Against Euro on Japan Elections; Exporters Gain

July 12 (Bloomberg) -- The yen fell on concern efforts to cut Japan’s public debt will be undermined after the ruling party lost control of the upper house. Most Asian stocks rose, led by Japanese exporters and commodity producers.

The yen weakened against all 16 of its most-active counterparts at 11:28 a.m. in Tokyo, sliding to 112.23 per euro from 112.01 in New York on July 9. The MSCI Asia Pacific Index was little changed at 116.07, following a two-day, 2.6 percent rally. Standard & Poor’s 500 Index futures slipped 0.2 percent.

The Democratic Party of Japan won 44 seats in the upper house in yesterday’s elections, less than the opposition Liberal Democratic Party’s 51 seats, making it less likely that Prime Minister Naoto Kan will be able to raise the sales tax to cut the world’s largest public debt. Stocks fluctuated ahead of the start of the U.S. second-quarter earnings season, with S&P 500 companies projected to post profit gains of 34 percent, according to analysts’ estimates compiled by Bloomberg.

“The yen could actually weaken because there’s going to continued spending by the government and there’s going to be a delay in the consumption tax hike,” Curtis Freeze, chairman of Honolulu-based Prospect Asset Management Inc. with about $1 billion in assets, said in a Bloomberg Television interview. “Earnings are the key but it’s going to be very company specific.”

Four stocks rose for every three that fell among the MSCI index’s 985 members, with a measure tracking materials stocks posting the biggest gain among 10 industry groups. The Nikkei 225 Stock Average climbed 0.1 percent, a third day of gains.

Honda, Sony

Honda Motor Co. jumped 2.8 percent and Sony Corp. rallied 3.6 percent as the yen fell to as weak as 89.16 per dollar, the least since June 29, from 88.62 last week. The Japanese currency also weakened before reports this week that are forecast to show a rise in European industrial production and a drop in U.S. initial jobless claims.

“With extreme worries about the fate of the global economy easing, risk aversion is also weakening,” said Tomohiro Nishida, a Tokyo-based foreign-currency dealer at Chuo Mitsui Trust & Banking Co., a unit of Japan’s seventh-largest banking group. “The recent bout of yen buying, driven by strong risk aversion, seems to be running out of steam.”

Commodity-related stocks rallied, with Rio Tinto Group rising 1.3 percent and Nippon Steel Corp., Japan’s largest steelmaker, surging 3.3 percent. Alcoa Inc., the first company in the Dow Jones Industrial Average to report second-quarter earnings, will post a profit for the first time in three quarters, according to analyst estimates compiled by Bloomberg.

Three-month copper futures fell as much as 0.6 percent to $6,720 a metric ton on the London Metal Exchange after a customs office report showed that imports by China, the largest user, dropped for a third month in June. A report also showed China, the world’s second-biggest energy consumer, increased crude imports to a record in June, helping to drive a fourth day of gains in crude. Oil gained 0.2 percent to $76.24 in New York.